Sustainable Growth Rate Calculator
The Sustainable Growth Rate Calculator is a tool that helps businesses determine their maximum sustainable growth rate (SGR) based on their retention ratio and return on equity (ROE). It is useful for financial planning and assessing growth potential without overextending resources.
Calculate Sustainable Growth Rate
What is Sustainable Growth Rate?
The Sustainable Growth Rate (SGR) is the maximum rate at which a company can grow its sales, earnings, and dividends without needing to raise external capital. It is determined by the company's return on equity (ROE) and retention ratio (the proportion of earnings reinvested).
What is Sustainable Growth Rate Calculator?
The Sustainable Growth Rate Calculator is a tool that allows businesses and investors to calculate the sustainable growth rate of a company. By entering key financial figures like ROE and the retention ratio, you can calculate the maximum growth rate a business can sustain while remaining financially healthy.
How to Use Sustainable Growth Rate Calculator?
To use the Sustainable Growth Rate Calculator, simply enter the company's Return on Equity (ROE) and the Retention Ratio values into the provided fields. Then, click the "Calculate" button to get the sustainable growth rate.
What is the Formula of Sustainable Growth Rate?
The formula for Sustainable Growth Rate (SGR) is:
SGR = ROE × Retention Ratio
Advantages of Sustainable Growth Rate Calculator:
- Helps companies estimate their optimal growth without needing external funding.
- Provides valuable insights into the financial health and growth potential of a business.
- Easy to use and understand for both business owners and investors.
Disadvantages of Sustainable Growth Rate Calculator:
- Does not account for external factors like market conditions or competition.
- Assumes that ROE and retention ratio remain constant over time, which may not be true in practice.
- May not provide an accurate growth estimate for companies with fluctuating financials.