Sustainable Growth Rate Calculator
Calculate sustainable growth rate from return on equity and earnings retention.
How to Use the Sustainable Growth Rate Calculator
Enter return on equity and the retention ratio, or the equivalent inputs requested by the tool. The calculator estimates the rate at which a company could grow using internally generated equity without changing its basic financing structure.
Practical Example
If return on equity is 15% and the company retains 60% of earnings, the sustainable growth rate is about 9%.
Factors That Affect the Result
Profitability, dividend policy, leverage, asset efficiency and changes in capital structure can all affect sustainable growth. The result is a simplified planning estimate.
Frequently Asked Questions
What is the sustainable growth rate formula?
A common version is SGR = ROE × Retention Ratio.
Can a company grow faster than its SGR?
Yes, but it may need additional debt, equity, improved efficiency or unusually strong profitability.
Is a higher SGR always better?
No. Fast growth can still create risks if returns, cash flow or financing quality deteriorate.
What Sustainable Growth Rate Assumes
Sustainable growth rate links profitability, retention and reinvestment under a simplified financing framework. Changes in margins, payout policy, leverage or asset efficiency can change the rate. It is a planning concept rather than a guarantee that a company can or will grow at that pace.