How to Use Sustainable Growth Rate Calculator
The Sustainable Growth Rate Calculator estimates how fast a company can grow using only its retained earnings, without raising additional equity or changing its capital structure.
- Choose a mode — Pick Basic if you already know ROE and dividend payout; pick DuPont when you want to feed in net margin, asset turnover, and equity multiplier.
- Enter the financial inputs — In Basic mode supply net income, equity, and payout ratio; in DuPont mode supply the three DuPont components plus retention ratio.
- Pick a currency — The currency selector keeps the symbol consistent if you cross-check absolute amounts.
- Read the Result — The Sustainable Growth Rate Calculator instantly displays the SGR along with the underlying ROE and retention ratio used.
Formula & Theory — Sustainable Growth Rate Calculator
The Sustainable Growth Rate Calculator uses the classic Higgins formula.
SGR = ROE × Retention Ratio
Retention Ratio = 1 − Dividend Payout Ratio
ROE = Net Income / Shareholders' EquityIn DuPont form, ROE is decomposed so the calculator can highlight the lever driving growth:
ROE = Net Margin × Asset Turnover × Equity Multiplier
SGR = Net Margin × Asset Turnover × Equity Multiplier × Retention| Symbol | Meaning |
|---|---|
| ROE | Return on Equity |
| b | Retention ratio (1 − payout) |
| NM | Net profit margin |
| AT | Asset turnover |
| EM | Equity multiplier (Assets / Equity) |
Because SGR holds the three structural drivers (profitability, efficiency, leverage) constant, it tells you what is achievable without changing the company’s risk profile.
Use Cases for Sustainable Growth Rate Calculator
- Strategic planning — CFOs use the Sustainable Growth Rate Calculator to set realistic top-line targets that won’t force them to issue dilutive equity.
- Credit analysis — Lenders compare actual growth to SGR to spot firms that may be over-extending and at risk of breaching covenants.
- Equity research — Analysts triangulate forecast revenue against SGR to challenge management guidance.
- Dividend policy — Boards stress-test how raising payouts compresses SGR before approving new dividend programs.
- Capital budgeting — Treasury teams check whether reinvested cash flow alone funds the project pipeline, or whether external capital is unavoidable.
- Startups & SMEs — Founders use SGR to understand how aggressive growth plans match retained-earnings reality.
For finance teams, lenders, and investors, the Sustainable Growth Rate Calculator turns balance-sheet ratios into a single, actionable growth ceiling.