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.

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. 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 >>
  3. 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 >>
  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. What are some popular ETFs that track the industrial sector?

    As of April 2015, some of the most popular and best performing exchange-traded funds (ETFs) that track the industrial sector ... Read Full Answer >>
Related Articles
  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Active Trading Fundamentals

    Tips For Controlling Investment Losses

    A profit/loss plan helps investors recognize mistakes and invest logically, rather than emotionally.
  6. 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.
  7. 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.
  8. Entrepreneurship

    8 Fascinating Traits Billionaires Have In Common

    A top-notch education isn't enough to strike it rich. Nothing compares to learning the habits of the world's famous entrepreneurs and industry leaders.
  9. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  10. Mutual Funds & ETFs

    5 Dividend ETFs with Growth Potential

    A quick look at a few ETFs with substantial growth potential.

You May Also Like

Hot Definitions
  1. Fracking

    A slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations ...
  2. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  3. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  4. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  5. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  6. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
Trading Center