Explanation

To determine the company with the highest sustainable sales growth, we need to focus on the components that are sustainable in the long term:

• Volume Growth: Represents real growth in units sold, which is sustainable if driven by market demand, product quality, or competitive advantages.
• Price Growth: Represents the ability to increase prices, which can be sustainable if supported by brand strength, pricing power, or inflation.
• Foreign Currency Exchange: This is typically not sustainable as it depends on volatile currency movements and is often beyond the company's control.

Calculating Sustainable Growth Components:

• Company 1: Volume (8%) + Price (7%) = 15% sustainable growth
• Company 2: Volume (9%) + Price (2%) = 11% sustainable growth
• Company 3: Volume (7%) + Price (5%) = 12% sustainable growth

Total Sales Growth (Including Currency Effects):

• Company 1: 8% + 7% + (-3%) = 12%
• Company 2: 9% + 2% + 3% = 14%
• Company 3: 7% + 5% + 5% = 17%

Analysis:

• Company 1 has the highest sustainable growth (15%) despite having negative currency impact
• Company 2 has strong volume growth but lower pricing power
• Company 3 has the highest total growth but much of it comes from favorable currency movements

Company 1 has the highest sustainable growth because it combines strong volume growth (8%) with strong pricing power (7%), giving it 15% of sustainable growth components compared to 11% for Company 2 and 12% for Company 3.