Sustainable Growth Rate (SGR) Calculator

Calculate the sustainable growth rate, retention rate, and return on equity for a company based on its net income, dividends paid, and total shareholder equity.

Result Sustainable Growth Rate 0% Retention Rate 0% Return On Equity 0%

Sustainable Growth Rate Formula

Sustainable growth rate = ( Retention rate * Return on equity ) / 100

( 4% * 11% ) / 100 = 0.44%.John's company retains 4% of its earnings and has a return on equity (ROE) of 11%. John's sustainable growth rate is 0.44%. This means John's company can sustainably grow at a rate of 0.44% annually without needing external financing.

Retention Rate Formula

Retention rate = ( 1 - Dividends paid / Net income ) * 100

( 1 - $13100 / $10900 ) * 100 = -20.183%.The dividend paid by Acme Inc. is $13100, and the net income is $10900, resulting in a retention rate of -20.183%. The negative retention rate means that more dividends are being paid out than the company is earning, indicating a loss for the business.

Return On Equity Formula

Return on equity = Net income / Total shareholder equity * 100

$19500 / $12900 * 100 = 151.16%.John invested $19500 in stocks with a total shareholder equity of $12900, earning a return on equity (ROE) of 151.16%. The result indicates John's investment is generating an extremely high and potentially unsustainable rate of return from his net income.

Meaning

The Sustainable Growth Rate (SGR) is a measure used to evaluate the growth potential of an individual's salary over time. It represents the rate at which an employee's salary can increase while still being considered sustainable and market-based, taking into account factors such as cost-of-living adjustments, industry standards, and economic conditions.