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How to calculate Sustainable growth rate

The Sustainable growth rate formula, with plain worked examples you can check yourself.

Sustainable growth rate = ROE × b

The result is a percentage (%).

Worked examples

ROE = 15% · b = 40%Sustainable growth rate = 6%
ROE = 15% · b = 80%Sustainable growth rate = 12%
ROE = 20% · b = 80%Sustainable growth rate = 16%

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Investing & Returns.

Related terms

DividendBondHedgingArbitrageLeverageAsset allocation

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