Sustainable Growth Rate
What is a Sustainable Growth Rate (SGR)?
A sustainable growth rate (SGR) is the highest amount of growth a business can have without accumulating further debt. To find your business SGR, fill out this formula:
Sustainable growth rate = return on equity x (1 - dividend payout ratio)
High SGRs are desirable for companies, as they point to high-margin products, maximized sales and good inventory management. However, it can be difficult for companies to maintain high SGRs over time without reaching saturation.