Sustainable Growth Rate - SGR

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DEFINITION of 'Sustainable Growth Rate - SGR'

The maximum growth rate that a firm can sustain without having to increase financial leverage.

Calculated as:

ROE x (1 - dividend-payout ratio)

INVESTOPEDIA EXPLAINS 'Sustainable Growth Rate - SGR'

The sustainable growth rate is a measure of how much a firm can grow without borrowing more money. After the firm has passed this rate, it must borrow funds from another source to facilitate growth.

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