Sustainable Growth Rate Calculator

Enter the return on equity (ROE) and the retention rate into the calculator to determine the sustainable growth rate. The retention rate is equal to 1 minus the dividend payout ratio.

Sustainable Growth Rate Formula

The following equations are used to calculator the sustainable growth rate of a company.

SGR = (ROE) * RR

SGR = (ROE) * ( 1 – DPR )

ROE = Net Income / Equity

  • Where SGR is the sustainable growth rate
  • ROE is the return on equity
  • RR is the retention rate
  • DPR is the dividend payout ratio

Sustainable Growth Rate Definition

A sustainable growth rate is defined as the rate at which a business can re-invest capital back into the business without effecting the overall growth.

Sustainable Growth Rate Example

How to calculate a sustainable growth rate?

  1. First, determine the return on equity.

    Calculate the total return on equity the company achieves on average.

  2. Next, determine the retention rate.

    Calculate or determine the total retention rate.

  3. Finally, calculate the sustainable growth rate.

    Use the formula above to calculate the sustainable growth rate.

FAQ

What is a sustainable growth rate?

A sustainable growth rate is the rate at which a company can re-invest capital back into it’s business while still retaining overall growth of the company.

How can sustainable growth rate increase?

The rate at which a company can grow is dependent on many factors, but the quickest way to increase expansion is through greater capital through investments or revenue. Typically early on in a business life cycle, most of the capital comes from investment.

sustainable growth rate calculator
sustainable growth rate formula