Sustainable Growth Rate - SGR

AAA

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.

VIDEO

Loading the player...
RELATED TERMS
  1. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders ...
  2. Critical Mass

    A very important or crucial stage in a company's development, ...
  3. Dividend Payout Ratio

    The percentage of earnings paid to shareholders in dividends. ...
  4. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  5. Times Revenue Method

    A valuation method used to determine the maximum value of a company. ...
  6. Growth Firm

    A company that is growing at a rapid pace compared to its peers ...
RELATED FAQS
  1. How does equity financing affect a company's financials compared with the effects ...

    The sustainable growth rate, or SGR, for a company fluctuates depending on profitability and the dividend payout ratio, which ... Read Full Answer >>
  2. How can I find out the Medicare sustainable growth rate?

    Per the Social Security Act, the Medicare Payment Advisory Commission is required to make an estimate of the sustainable ... Read Full Answer >>
  3. In the context of a startup, what is sustainable growth?

    Sustainable growth is the maximum growth rate a startup can maintain internally without the need to seek external financing, ... Read Full Answer >>
  4. What incentives are there for a given country to enforce sustainable growth rate ...

    There are strong incentives for a country to expressly support sustainable growth rate (SGR) policies for domestic industry. ... Read Full Answer >>
  5. What is the history of the sustainable growth rate?

    The sustainable growth rate (SGR) can refer to different things. The two most common references are to the Medicare SGR or ... Read Full Answer >>
  6. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>
Related Articles
  1. Economics

    How to Calculate Sustainable Growth Rate

    Sustainable growth rate is the rate at which a company can grow without having to borrow money to fund its growth.
  2. Markets

    Is Growth Always A Good Thing?

    Getting big quickly looks good, but companies can get into trouble when they do it too fast. Find out how to spot this trouble.
  3. Markets

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  4. Mutual Funds & ETFs

    Mutual Funds: Does Size Really Matter?

    The growth of mutual funds isn't always cause for celebration. Read on to find out why.
  5. Markets

    How To Use Price-To-Sales Ratios To Value Stocks

    Take a look at how this effective ratio can be influenced by certain critical factors.
  6. Active Trading Fundamentals

    Tips For Controlling Investment Losses

    A profit/loss plan helps investors recognize mistakes and invest logically, rather than emotionally.
  7. Investing Basics

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.
  8. Forex Education

    Compound Annual Growth Rate: What You Should Know

    The CAGR is a good and valuable tool to evaluate investment options, but it does not tell the whole story.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard International Stock

    Discover how the Vanguard Total International Stock ETF is managed, and learn which investors may find it suitable as part of a diversified portfolio.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Biotech

    Discover the investment management style of SPDR S&P Biotech ETF, and learn which investors can benefit from the fund's focused biotech holdings.

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!