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There is a logical connection between the Retention Ratio and the growth of the business The faster you expect your business to grow, the larger the percentage of net income you ll need to retain in order to fuel that growth As a benchmark, the Dividend Payout Ratio (1 RR) for publicly held firms was 47 percent at the beginning of 1926 and decreased to 32 percent by

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Remote Procedure Call (RPC) is a mechanism that allows a program running on one computer to seamlessly execute code on a remote system One of the first RPC implementations was developed by Sun Microsystems and used a system called external data representation (XDR) The implementation was designed to interoperate with Sun s Network Information System (NIS) and Network File System (NFS) Since Sun Microsystem s development of RPC services, many other UNIX vendors have adopted it Adoption of an RPC standard is a good thing from an interoperability standpoint However, when RPC services were first introduced, there was very little security built in Thus, Sun and other vendors have tried to patch the existing legacy framework to make it more secure, but it still suffers from a myriad of security-related problems As discussed in 3, RPC services register with the portmapper when started To contact an RPC service, you must query the portmapper to determine which port the required RPC service is listening on We also discussed how to obtain a listing of running RPC services by using rpcinfo or by using the n option if the portmapper services were firewalled Unfortunately, numerous stock versions of UNIX have many RPC services enabled upon bootup To exacerbate matters, many of the RPC services are extremely complex and run with root privileges Thus, a successful buffer overflow or input validation attack will lead to direct root access The current rage in remote RPC buffer overflow attacks relates to rpcttdbserverd (http://wwwcertorg/advisories/ CA-9811tooltalkhtml) and rpccmsd (http://wwwcertorg/advisories/ CA-99-08-cmsdhtml), which are part of the common desktop environment (CDE) Because these two services run with root privileges, attackers only need to successfully ex-





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the end of 200011 However, a new working paper by Boudoukh, et al12 suggests that stock repurchases have taken up the slack for the drop in the Payout Ratio This means that publicly traded firms retain on average 1 47% 53% of their income for cash flow and growth Publicly held firms experienced an average growth of approximately 6 to 8 percent, which is much faster than private firms certainly due to their much larger Retention Ratio and greater business opportunities13 Growth in cash flows is not the same as sales growth Often during periods of high sales growth, the firm s profit margin declines Thus, it is not only possible but common to find high sales growth coupled with stagnant profits and cash flows The cash flows of most healthy privately held firms grow from 1 to 6 percent per year The 1 percent nominal growth is really a 2 percent decline, after subtracting 3 percent for inflation, while the 6 percent growth represents 3 percent for inflation and 3 percent real growth It is a rare privately held firm that can reasonably be expected to grow forever at an average rate of 8 percent per year That rate is more typical of a young firm, especially one with a very exciting or unusual product It s important to note that it is growth in cash flows not growth in sales that count in valuation If sales grow by 15 percent per year but the business is losing its profit margins and cash flows decline, it is the decline in cash flow that we use in our valuation formula, not the increase in sales

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