Sustainable growth rate = Return on equity × Retention rate

Name: Sustainable growth rate = Return on equity × Retention rate
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Question

Quizplus · Accepted Answer

The sustainable growth rate formula calculates the rate at which a company can grow its earnings, dividends, and sales without having to increase debt or equity. It is indeed the product of the return on equity (ROE) and the retention rate (the proportion of earnings not paid out as dividends to shareholders).

Sustainable Growth Rate = Return on Equity × Retention Rate