# Sustainable Growth Rate Calculator

URL: https://speedycalculator.com/calculators/finance/sustainable-growth-rate/
Last updated: 2026-10-25

> The sustainable growth rate calculator works out how fast a company can grow using only retained earnings, without new equity or changing its debt ratio – the product of return on equity and the retention ratio.

## Inputs

- Net income
- Dividends paid
- Total shareholders' equity

## Results

- Retention ratio
- Return on equity (ROE)
- Sustainable growth rate (SGR)
- SGR using beginning-of-year equity

## Formula

```
Retention ratio b = (net income − dividends) ÷ net income
ROE = net income ÷ equity
SGR = ROE × b (or ROE × b ÷ (1 − ROE × b) using beginning equity)
```

## Explanation

If a company tries to grow faster than its sustainable growth rate, it must borrow more, issue shares or improve profitability. Growing slower may leave capital idle.

### How to use the Sustainable Growth Rate Calculator

- **Net income**
- **Dividends paid**
- **Total shareholders' equity**

Results update as you type, and every field accepts the units shown in its menu.

### How it works

Enter net income, dividends paid and total shareholders' equity.

### Tips

- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.

### Common mistakes to avoid

- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.

### Inputs explained

FieldWhat to enterNet incomeAmount in your currencyDividends paidAmount in your currencyTotal shareholders' equityAmount in your currency

### What each result means

- **Retention ratio** = ([Net income] - [Dividends paid])÷[Net income]×100
- **Return on equity (ROE)** = [Net income]÷[Total shareholders' equity]×100
- **Sustainable growth rate (SGR)** = [Return on equity (ROE)]×[Retention ratio]÷100
- **SGR using beginning-of-year equity** = [Return on equity (ROE)]×[Retention ratio]÷100÷(1 - [Return on equity (ROE)]×[Retention ratio]÷10000)

### Example values

How the main result changes when **Net income** changes and everything else stays at the example values above:

Net incomeSustainable growth rate (SGR) (%)7,500,0002.511,250,0006.2515,000,0001018,750,00013.7522,500,00017.530,000,00025

## Worked example

Inputs — Net income: $15,000,000; Dividends paid: $5,000,000; Total shareholders' equity: $100,000,000.

Results — Retention ratio = 66.67 %; Return on equity (ROE) = 15 %; **Sustainable growth rate (SGR) = 10 %**; SGR using beginning-of-year equity = 11.11 %.

## FAQ

**What is the sustainable growth rate?**
The fastest a company can grow without outside equity or more leverage.

**How do I raise the SGR?**
Increase ROE or retain more earnings.

**What if actual growth exceeds SGR?**
The company will need more debt or new equity.

**What formula does the Sustainable Growth Rate Calculator use?**
Retention ratio b = (net income − dividends) ÷ net income.


## Sources

- [Corporate Finance Institute – financial ratios](https://corporatefinanceinstitute.com/)