FINANCIAL CALCULATORS
Sustainable Growth Rate Calculator
Calculate your company’s sustainable growth rate without external financing.
What is the Sustainable Growth Rate Calculator & How does it work?
The Sustainable Growth Rate (SGR) is a financial metric that indicates the maximum rate at which a company can grow using only its retained earnings, without needing to raise additional capital. This rate helps businesses understand their internal growth potential and plan for future expansion.
To calculate the SGR, you need to consider two key factors: the Retention Ratio (b) and the Return on Equity (ROE). The Retention Ratio is the percentage of net income that a company reinvests in its operations, while the ROE measures how efficiently the company uses its equity capital to generate profits.
To calculate the SGR, you need to consider two key factors: the Retention Ratio (b) and the Return on Equity (ROE). The Retention Ratio is the percentage of net income that a company reinvests in its operations, while the ROE measures how efficiently the company uses its equity capital to generate profits.
SGR = b times ROE
b = Retention Ratio
ROE = Return on Equity
ROE = Return on Equity
Parameters
Sustainable Growth Rate—
Frequently Asked Questions
What is the Sustainable Growth Rate (SGR)?
The SGR is the maximum rate at which a company can grow internally, using only its retained earnings.
How do I calculate the Retention Ratio?
Retention Ratio = (Net Income - Dividends) / Net Income. It shows the percentage of net income reinvested in the business.
What does Return on Equity (ROE) represent?
ROE measures how efficiently a company uses its equity to generate profits, expressed as a percentage.
Why is SGR important for a business?
SGR helps businesses understand their internal growth potential and plan for future expansion without external funding.
Can the SGR be higher than 100%?
No, the SGR cannot exceed 100%. It represents the maximum growth rate possible with retained earnings alone.
How does increasing the Retention Ratio affect SGR?
Increasing the Retention Ratio generally increases the SGR, as more profits are reinvested in the business.
What factors can limit a company's SGR?
Limited by ROE and Retention Ratio; low profitability or high dividend payouts can reduce the SGR.
Results are for informational purposes only and do not constitute professional advice.