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Sustainable Growth Measures

 Self-Paced Overview

Actual vs. Sustainable Growth

The return on equity, retention ratio and sustainable growth measures for the years in the previous example would be:

  2013 2014 2015 2016 2017
ROA 4.41% 7.49% 4.37% 4.84% 5.18%
Retention Ratio .5 .6 .667 .714 .74
Sustainable Growth 2.2% 4.49% 2.92% 3.46% 3.84%

If actual growth for the years in question is 5%, 5.2%, 5.1%, 5.3%, and 6.1%, then actual growth graphed against sustainable growth would appear as:

Actual Growth vs. Sustainable Growth
Actual Growth vs. Sustainable Growth

20132014201520162017

To calculate actual growth in sales, the analyst would find the percentage increase from one year to the next. For instance, if sales last year were $100,000 and $110,000 this year, then the actual growth rate in sales would be 10%.

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