The sustainable growth rate is a measure of a company’s growth that takes into account both its internal growth and external growth opportunities. To calculate the sustainable growth rate you need to find the company’s return on equity (ROE) and its retention ratio. The sustainable growth rate is then calculated as follows:
Sustainable Growth Rate = ROE x Retention Ratio
For example let’s say that Company XYZ has an ROE of 10% and a retention ratio of 50%. This means that its sustainable growth rate would be 10% x 50% = 5%.
To maintain its current growth rate Company XYZ would need to reinvest 5% of its net income back into the business. This could be used to finance new products expand into new markets or for other growth initiatives.
Company XYZ would also need to generate new external growth opportunities in order to grow at a rate above 5%. This could be done through acquisitions joint ventures or other strategic partnerships.
The sustainable growth rate is a useful tool for companies to use when planning for future growth. By understanding both its internal and external growth potential a company can make better decisions about how to allocate resources and where to focus its efforts.
What is sustainable growth?
Answer: Sustainable growth is defined as the rate of growth that can be achieved without damaging or depleting the resources that support the economy.
How do you calculate sustainable growth?
Answer: To calculate sustainable growth you divide the services or goods produced by the environment’s renewable resources.
What factors affect sustainable growth?
Answer: A variety of factors can affect sustainable growth including environmental social and economic conditions.
Why is sustainable growth important?
Answer: Sustainable growth is important because it allows economies to expand without damaging or depleting the resources that support them.
What are the implications of unsustainable growth?
Answer: Unsustainable growth can lead to environmental degradation social unrest and economic instability.
What is the carrying capacity?
Answer: The carrying capacity is the maximum number of individuals that can be supported by a given environment.
What happens when the carrying capacity is exceeded?
Answer: When the carrying capacity is exceeded environmental degradation and depletion of resources can occur.
How can you tell if a population is exceeding the carrying capacity?
Answer: If a population is growing at a rate that exceeds the sustainable growth rate then it is exceeding the carrying capacity.
What is the ecological footprint?
Answer: The ecological footprint is a measure of the impact of humans on the environment.
How does the ecological footprint relate to sustainable growth?
Answer: The ecological footprint measures the amount of resources that are consumed by humans.
If the ecological footprint exceeds the carrying capacity then sustainable growth is not possible.
What are the goals of sustainable development?
Answer: The goals of sustainable development are to meet the needs of current generations without compromising the ability of future generations to meet their own needs.
What are some of the sustainable development indicators?
Answer: Some of the sustainable development indicators include air and water quality biodiversity and renewable energy.
What is the sustainable development goal for energy?
Answer: The sustainable development goal for energy is to ensure access to affordable reliable and sustainable energy for all.
What is the sustainable development goal for water?
Answer: The sustainable development goal for water is to ensure access to clean water and sanitation for all.
What is the sustainable development goal for food?
Answer: The sustainable development goal for food is to ensure access to safe nutritious and sufficient food for all.
