Sustainable Growth Rate Calculator
Multiply return on equity by the retention ratio to find the sustainable growth rate, the pace a company can grow without new equity.
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Enter ROE and the retention ratio to see the sustainable growth rate.
Worked example
With these example inputs:
- Return on equity (ROE)15%
- Retention ratio60%
Sustainable growth rate: 9.0%
- Return on equity15.0%
- If the first figure were 10% higher9.9%
Frequently asked questions
How is the sustainable growth rate calculated?
Multiply return on equity by the retention ratio, the share of earnings kept rather than paid as dividends. A 15% ROE with 60% retention gives a 9% sustainable growth rate.
Why is it 'sustainable'?
It is the growth a firm can fund from retained profits alone, without issuing new shares or raising leverage. Growing faster usually needs outside capital.