Is a 12.00% sustainable growth rate high or low?
On the defaults — 60.00% retention and 20.00% return on equity — the sustainable growth rate is 12.00%. A 12.00% rate is neither high nor low on its own: it means the company can grow its sales by 12% a year from the profit it keeps — $1,000,000.00 of sales can grow to $1,120,000.00 without new money. A rate of 8–12% is typical for a mature, steady company: enough growth to keep ahead of inflation and add value, without needing outside capital. A rate of 20% or more means the company keeps most of its profit and earns a lot on it — young growth companies commonly grow that fast. A rate of 0% means the company pays out everything it earns and keeps nothing — a company that pays out everything cannot grow from its own profit.
Three things about the model are worth stating plainly.
First, the sustainable growth rate is 60.00% × 20.00% ÷ 100 = 12.00%. Second, the maximum next-year sales are $1,000,000 × (1 + 12.00% ÷ 100) = $1,120,000.00. And third, the retention needed for a 10.00% target is 10.00% ÷ 20.00% × 100 = 50.00%, and the return on equity needed for a 10.00% target is 10.00% ÷ 60.00% × 100 = 16.67% (exact 16.6667%) — and the forward at the displayed 16.67% is 10.0020%, which displays as 10.00% but is above the 10.00% target; all listed in Accuracy & limitations.
The worked example, line by line
Setup: 60.00% retention, 20.00% return on equity, target rate 10.00%, sales $1,000,000.
Line 1 — the sustainable growth rate. The sustainable growth rate is 60.00% × 20.00% ÷ 100 = 12.00%.
Line 2 — the maximum next-year sales. The maximum next-year sales are $1,000,000 × (1 + 12.00% ÷ 100) = $1,120,000.00.
Line 3 — the retention needed. The retention needed for a 10.00% target is 10.00% ÷ 20.00% × 100 = 50.00%.
Line 4 — the return on equity needed. The return on equity needed for a 10.00% target is 10.00% ÷ 60.00% × 100 = 16.67% (exact 16.6667%).
Line 5 — the check. At 50.00% retention the rate is 10.00%, the target rate; and at 16.67% return on equity the forward is 10.0020% — it displays as 10.00% but is above the 10.00% target.
Every branch, checked
Retention 50.00%: Retention 50.00%; return on equity 20.00%; sustainable growth rate 10.00%; maximum next-year sales $1,100,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 20.00% — With retention of 50.00% the rate falls to 10.00% — $1,000,000.00 of sales can grow to $1,100,000.00.
Return on equity 25.00%: Retention 60.00%; return on equity 25.00%; sustainable growth rate 15.00%; maximum next-year sales $1,150,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 40.00%; return on equity needed for the 10.00% target 16.67% — With a return on equity of 25.00% the rate rises to 15.00% — $1,000,000.00 of sales can grow to $1,150,000.00.
Retention 80.00%: Retention 80.00%; return on equity 20.00%; sustainable growth rate 16.00%; maximum next-year sales $1,160,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 12.50% — With retention of 80.00% the rate rises to 16.00% — $1,000,000.00 of sales can grow to $1,160,000.00.
Return on equity 15.00%: Retention 60.00%; return on equity 15.00%; sustainable growth rate 9.00%; maximum next-year sales $1,090,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 66.67%; return on equity needed for the 10.00% target 16.67% — With a return on equity of 15.00% the rate falls to 9.00% — $1,000,000.00 of sales can grow to $1,090,000.00.
Retention 40.00%: Retention 40.00%; return on equity 20.00%; sustainable growth rate 8.00%; maximum next-year sales $1,080,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 25.00% — With retention of 40.00% the rate falls to 8.00% — $1,000,000.00 of sales can grow to $1,080,000.00.
Return on equity 30.00%: Retention 60.00%; return on equity 30.00%; sustainable growth rate 18.00%; maximum next-year sales $1,180,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 33.33%; return on equity needed for the 10.00% target 16.67% — With a return on equity of 30.00% the rate rises to 18.00% — $1,000,000.00 of sales can grow to $1,180,000.00.
Rate bars — retention 70.00%, return on equity 22.00%, retention 55.00%: retention 70.00%: sustainable growth rate 14.00%; return on equity 22.00%: sustainable growth rate 13.20%; retention 55.00%: sustainable growth rate 11.00% — Retention of 70.00% gives a rate of 14.00%; a return on equity of 22.00% gives a rate of 13.20%; retention of 55.00% gives a rate of 11.00%.
The reverses, worked backwards
Smallest retention for the growth rate to REACH 10.00%: At the displayed 50.00% the figures are Retention 50.00%; return on equity 20.00%; sustainable growth rate 10.00%; maximum next-year sales $1,100,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 20.00%. At the displayed 50.00% the rate is 10.00% (exactly 10.00%). At 49.99% the rate is 10.00% (unrounded 9.9980% — print it) — it displays as 10.00% but is below the 10.00% target — so 50.00% is the smallest retention for the growth rate to reach 10.00%.
Smallest return on equity for the growth rate to REACH 12.00%: At the displayed 20.00% the figures are Retention 60.00%; return on equity 20.00%; sustainable growth rate 12.00%; maximum next-year sales $1,120,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 16.67%. At the displayed 20.00% the rate is 12.00% (exactly 12.00%). At 19.99% the rate is 11.99% (unrounded 11.9940% — print it) — it displays as 11.99% and is below the 12.00% target — so 20.00% is the smallest return on equity for the growth rate to reach 12.00%.
Largest retention for the growth rate to STAY at or below 15.00%: At the displayed 75.00% the figures are Retention 75.00%; return on equity 20.00%; sustainable growth rate 15.00%; maximum next-year sales $1,150,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 13.33%. At the displayed 75.00% the rate is 15.00% (exactly 15.00%). At 75.01% the rate is 15.00% (unrounded 15.0020% — print it) — it displays as 15.00% but is above the 15.00% target — so 75.00% is the largest retention for the growth rate to stay at or below 15.00%.
Smallest return on equity for the growth rate to REACH 15.00%: At the displayed 25.00% the figures are Retention 60.00%; return on equity 25.00%; sustainable growth rate 15.00%; maximum next-year sales $1,150,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 40.00%; return on equity needed for the 10.00% target 16.67%. At the displayed 25.00% the rate is 15.00% (exactly 15.00%). At 24.99% the rate is 14.99% (unrounded 14.9940% — print it) — it displays as 14.99% and is below the 15.00% target — so 25.00% is the smallest return on equity for the growth rate to reach 15.00%.
Largest retention for the growth rate to STAY at or below 8.00%: At the displayed 40.00% the figures are Retention 40.00%; return on equity 20.00%; sustainable growth rate 8.00%; maximum next-year sales $1,080,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 25.00%. At the displayed 40.00% the rate is 8.00% (exactly 8.00%). At 40.01% the rate is 8.00% (unrounded 8.0020% — print it) — it displays as 8.00% but is above the 8.00% target — so 40.00% is the largest retention for the growth rate to stay at or below 8.00%.
Smallest return on equity for the growth rate to REACH 8.00%: At the displayed 13.34% the figures are Retention 60.00%; return on equity 13.34%; sustainable growth rate 8.0040%; maximum next-year sales $1,080,040.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 74.96%; return on equity needed for the 10.00% target 16.67%. At the displayed 13.34% the rate is 8.00% (unrounded 8.0040% — print it) — it displays as 8.00% but is above the 8.00% target. At 13.33% the rate is 8.00% (unrounded 7.9980% — print it) — it displays as 8.00% but is below the 8.00% target — so 13.34% is the smallest return on equity for the growth rate to reach 8.00%.
A warning about the neighbours: every neighbour above sits one hundredth of a percent from the star, and every neighbour displays as the target when rounded to two decimals, yet sits below or above it. The rate is the product of retention and return on equity, so the reverses have exact closed forms: the retention needed is the target divided by the return on equity, times 100, and the return on equity needed is the target divided by the retention, times 100. The page prints the unrounded rates in full so the rounding does not mislead you: 9.9980, 11.9940, 15.0020, 14.9940, 8.0020, 8.0040 and 7.9980. The 8.0040% forward is printed at four decimals on purpose — its two-decimal print, 8.00%, would read as exactly at the target while the unrounded value sits above it.
What the defaults assume
The defaults are 60.00% retention, 20.00% return on equity, a target rate of 10.00% and sales of $1,000,000 — Retention 60.00%; return on equity 20.00%; sustainable growth rate 12.00%; maximum next-year sales $1,120,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 16.67%. With Retention 50.00%, Retention 50.00%; return on equity 20.00%; sustainable growth rate 10.00%; maximum next-year sales $1,100,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 20.00%. With Return on equity 25.00%, Retention 60.00%; return on equity 25.00%; sustainable growth rate 15.00%; maximum next-year sales $1,150,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 40.00%; return on equity needed for the 10.00% target 16.67%. With Retention 80.00%, Retention 80.00%; return on equity 20.00%; sustainable growth rate 16.00%; maximum next-year sales $1,160,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 12.50%. With Return on equity 15.00%, Retention 60.00%; return on equity 15.00%; sustainable growth rate 9.00%; maximum next-year sales $1,090,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 66.67%; return on equity needed for the 10.00% target 16.67%. With Retention 40.00%, Retention 40.00%; return on equity 20.00%; sustainable growth rate 8.00%; maximum next-year sales $1,080,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 25.00%. With Return on equity 30.00%, Retention 60.00%; return on equity 30.00%; sustainable growth rate 18.00%; maximum next-year sales $1,180,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 33.33%; return on equity needed for the 10.00% target 16.67%. With Rate bars, retention 70.00%: sustainable growth rate 14.00%; return on equity 22.00%: sustainable growth rate 13.20%; retention 55.00%: sustainable growth rate 11.00%. With Retention 0.00%, Retention 0.00%; return on equity 20.00%; sustainable growth rate 0.00%; maximum next-year sales $1,000,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target — — nothing kept, so nothing to grow with. With Return on equity 0.00%, Retention 60.00%; return on equity 0.00%; sustainable growth rate 0.00%; maximum next-year sales $1,000,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target —; return on equity needed for the 10.00% target 16.67% — the kept profit earns nothing, so the rate is 0.00%. With Retention 100.00%, Retention 100.00%; return on equity 20.00%; sustainable growth rate 20.00%; maximum next-year sales $1,200,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 10.00% — everything kept, so the rate is the return on equity itself. With Retention 66.67%, return on equity 15.00%, Retention 66.67%; return on equity 15.00%; sustainable growth rate 10.0005%; maximum next-year sales $1,100,005.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 66.67%; return on equity needed for the 10.00% target 15.00% (unrounded 10.0005% — displays 10.00% but is above 10.00% unrounded). With Retention −20.00%, Retention −20.00%; return on equity 20.00%; sustainable growth rate −4.00%; maximum next-year sales $960,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target −50.00% — the company paid out more than it earned, so the rate is negative — the calculator shows the −4.00% figure with a note, never hides it. With Return on equity −10.00%, Retention 60.00%; return on equity −10.00%; sustainable growth rate −6.00%; maximum next-year sales $940,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target −100.00%; return on equity needed for the 10.00% target 16.67% — negative return on equity, shown with a note, never hidden. With Rate bars, retention 50.00%: sustainable growth rate 10.00%; return on equity 25.00%: sustainable growth rate 15.00%; retention 70.00%: sustainable growth rate 14.00%.
A note on the rounding: the rate is displayed to two decimals, half-up. At 49.99% retention the unrounded rate is 9.9980% — it displays as 10.00% but is below the 10.00% target. At 19.99% return on equity the unrounded rate is 11.9940% — it displays as 11.99% and is below the 12.00% target. At 75.01% retention the unrounded rate is 15.0020% — it displays as 15.00% but is above the 15.00% target. At 24.99% return on equity the unrounded rate is 14.9940% — it displays as 14.99% and is below the 15.00% target. At 40.01% retention the unrounded rate is 8.0020% — it displays as 8.00% but is above the 8.00% target. At 13.34% return on equity the unrounded rate is 8.0040% — it displays as 8.00% but is above the 8.00% target. At 13.33% return on equity the unrounded rate is 7.9980% — it displays as 8.00% but is below the 8.00% target. At 66.67% retention and 15.00% return on equity the unrounded rate is 10.0005% — it displays as 10.00% but is above 10.00% unrounded. The page prints the unrounded rates so the rounding does not mislead you.
Output · formula · meaning
| Output | Formula | What it means |
|---|
| Retention | input | 60.00%. |
| Return on equity | input | 20.00%. |
| Target rate | input | 10.00%. |
| Sales | input | $1,000,000.00. |
| Sustainable growth rate | retention × return on equity ÷ 100 | 12.00%. |
| Maximum next-year sales | sales × (1 + rate ÷ 100) | $1,120,000.00. |
| Retention needed for the 10.00% target | target ÷ return on equity × 100 | 50.00%. |
| Return on equity needed for the 10.00% target | target ÷ retention × 100 | 16.67%. |
| Verdict | how fast the company can grow from its own profit | 12.00% a year from your own profit — $1,000,000.00 of sales can grow to $1,120,000.00. |
| Reverse: Smallest retention (to the hundredth) for the growth rate to REACH 10.00% | step | 50.00% → 50.00%. |
| Below the revr1 star | neighbor | Retention 49.99%; return on equity 20.00%; sustainable growth rate 9.9980%; maximum next-year sales $1,099,980.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 20.00%. |
| Above the revr1 star | neighbor | Retention 50.01%; return on equity 20.00%; sustainable growth rate 10.0020%; maximum next-year sales $1,100,020.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 20.00%. |
| Reverse: Smallest return on equity (to the hundredth) for the growth rate to REACH 12.00% | step | 20.00% → 20.00%. |
| Below the revr2 star | neighbor | Retention 60.00%; return on equity 19.99%; sustainable growth rate 11.9940%; maximum next-year sales $1,119,940.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.03%; return on equity needed for the 10.00% target 16.67%. |
| Above the revr2 star | neighbor | Retention 60.00%; return on equity 20.01%; sustainable growth rate 12.0060%; maximum next-year sales $1,120,060.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 49.98%; return on equity needed for the 10.00% target 16.67%. |
| Reverse: Largest retention (to the hundredth) for the growth rate to STAY at or below 15.00% | step | 75.00% → 75.00%. |
| Below the revr3 star | neighbor | Retention 74.99%; return on equity 20.00%; sustainable growth rate 14.9980%; maximum next-year sales $1,149,980.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 13.34%. |
| Above the revr3 star | neighbor | Retention 75.01%; return on equity 20.00%; sustainable growth rate 15.0020%; maximum next-year sales $1,150,020.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 13.33%. |
| Reverse: Smallest return on equity (to the hundredth) for the growth rate to REACH 15.00% | step | 25.00% → 25.00%. |
| Below the revr4 star | neighbor | Retention 60.00%; return on equity 24.99%; sustainable growth rate 14.9940%; maximum next-year sales $1,149,940.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 40.02%; return on equity needed for the 10.00% target 16.67%. |
| Above the revr4 star | neighbor | Retention 60.00%; return on equity 25.01%; sustainable growth rate 15.0060%; maximum next-year sales $1,150,060.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 39.98%; return on equity needed for the 10.00% target 16.67%. |
| Reverse: Largest retention (to the hundredth) for the growth rate to STAY at or below 8.00% | step | 40.00% → 40.00%. |
| Below the revr5 star | neighbor | Retention 39.99%; return on equity 20.00%; sustainable growth rate 7.9980%; maximum next-year sales $1,079,980.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 25.01%. |
| Above the revr5 star | neighbor | Retention 40.01%; return on equity 20.00%; sustainable growth rate 8.0020%; maximum next-year sales $1,080,020.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 24.99%. |
| Reverse: Smallest return on equity (to the hundredth) for the growth rate to REACH 8.00% | step | 13.34% → 13.34%. |
| Below the revr6 star | neighbor | Retention 60.00%; return on equity 13.33%; sustainable growth rate 7.9980%; maximum next-year sales $1,079,980.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 75.02%; return on equity needed for the 10.00% target 16.67%. |
| Above the revr6 star | neighbor | Retention 60.00%; return on equity 13.35%; sustainable growth rate 8.01%; maximum next-year sales $1,080,100.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 74.91%; return on equity needed for the 10.00% target 16.67%. |
| Retention 50.00% | same model | Retention 50.00%; return on equity 20.00%; sustainable growth rate 10.00%; maximum next-year sales $1,100,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 20.00%. |
| Return on equity 25.00% | same model | Retention 60.00%; return on equity 25.00%; sustainable growth rate 15.00%; maximum next-year sales $1,150,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 40.00%; return on equity needed for the 10.00% target 16.67%. |
| Retention 80.00% | same model | Retention 80.00%; return on equity 20.00%; sustainable growth rate 16.00%; maximum next-year sales $1,160,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 12.50%. |
| Return on equity 15.00% | same model | Retention 60.00%; return on equity 15.00%; sustainable growth rate 9.00%; maximum next-year sales $1,090,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 66.67%; return on equity needed for the 10.00% target 16.67%. |
| Retention 40.00% | same model | Retention 40.00%; return on equity 20.00%; sustainable growth rate 8.00%; maximum next-year sales $1,080,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 25.00%. |
| Return on equity 30.00% | same model | Retention 60.00%; return on equity 30.00%; sustainable growth rate 18.00%; maximum next-year sales $1,180,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 33.33%; return on equity needed for the 10.00% target 16.67%. |
| Rate bars — retention 70.00%, return on equity 22.00%, retention 55.00% | same model | retention 70.00%: sustainable growth rate 14.00%; return on equity 22.00%: sustainable growth rate 13.20%; retention 55.00%: sustainable growth rate 11.00%. |
Who uses this
- The investor checking a growth company: they learn 60.00% retention and 20.00% return on equity give a 12.00% rate — and they check the 50.00% reverse to see the retention a 10.00% rate needs.
- The analyst screening for overreach: they learn growing faster than the rate needs outside money — and they check the 75.00% reverse to see the retention a 15.00% rate needs.
- The student learning growth measures: they learn the sustainable growth rate is retention × return on equity — and they check the 13.34% reverse to see the return on equity an 8.00% rate needs.
- The founder planning the dividend: they learn a 60.00% retention keeps the growth rate at 12.00% — and they check the 40.00% reverse to see the retention an 8.00% rate needs.
Accuracy & limitations
The math is first-principles: the sustainable growth rate is retention × return on equity ÷ 100; the maximum next-year sales are sales times one plus the rate over 100; the retention needed for the target is the target divided by the return on equity, times 100; the return on equity needed for the target is the target divided by the retention, times 100 — all in percent, the rate displayed to two decimals half-up. This page uses the simple form — retention times return on equity — which assumes the company keeps the same share, earns the same return, and pays no new dividend — it is the standard textbook sustainable growth rate. At 0% retention the rate is 0.00% — nothing kept, so nothing to grow with. At 0% return on equity the rate is 0.00% — the kept profit earns nothing. At 100% retention the rate is 20.00% — everything kept, so the rate is the return on equity itself. At −20.00% retention the rate is −4.00% — paying out more than the company earned means the kept share is negative — the payout came from reserves or borrowing, and it cannot last — the calculator shows the −4.00% figure with a note, never hides it. At −10.00% return on equity the rate is −6.00% — negative return on equity, shown with a note, never hidden. What the model cannot do is judge the growth: the rate says nothing about whether the market wants the growth, whether the return on equity will hold as the company scales, or whether the company is borrowing to pay the dividend — a high rate is not automatically good: a company that grows 20% a year by keeping everything and earning little on it is worse than one that grows 10% by keeping half and earning a lot — what matters is what the kept profit earns. The rate differs from the retention ratio: retention is the share kept, the rate is what that share earns — so a 60.00% retention at 20.00% return on equity is a 12.00% rate, and the same retention at 15.00% return on equity is only 9.00%. The rate differs from return on equity: return on equity is profit against equity, the rate is growth against sales — a company can earn 30% on equity and still grow slowly if it pays out nearly everything. The rate differs from revenue growth: revenue growth is what actually happened, the sustainable growth rate is what the company can fund from its own profit — growing faster than the rate means the balance sheet is changing, usually by borrowing or issuing shares. The rate is the fastest the company can grow while keeping its balance sheet and its profitability unchanged — constant debt ratio, no new shares, constant return on equity. Use it to see how fast a company can grow from its own profit — then check whether the market wants that growth.
Cite this calculatorBright Side Kit. “Sustainable Growth Rate Calculator: How Fast Can You Grow” brightoolbox.com, 2026. Method: Sustainable growth rate = retention ratio × return on equity ÷ 100; maximum next-year sales = sales × (1 + rate ÷ 100); retention needed for the target = target ÷ return on equity × 100; return on equity needed for the target = target ÷ retention × 100. Reverses: smallest retention (to the hundredth) for the growth rate to REACH 10.00% is 50.00% (at 50.00% the rate is 10.00%, exactly 10.00%; at 49.99% the rate is 10.00%, unrounded 9.9980% — displays 10.00% but is below the 10.00% target); smallest return on equity (to the hundredth) for the growth rate to REACH 12.00% is 20.00% (at 20.00% the rate is 12.00%, exactly 12.00%; at 19.99% the rate is 11.99%, unrounded 11.9940% — displays 11.99% but is below the 12.00% target); largest retention (to the hundredth) for the growth rate to STAY at or below 15.00% is 75.00% (at 75.00% the rate is 15.00%, exactly 15.00%; at 75.01% the rate is 15.00%, unrounded 15.0020% — displays 15.00% but is above the 15.00% target); smallest return on equity (to the hundredth) for the growth rate to REACH 15.00% is 25.00% (at 25.00% the rate is 15.00%, exactly 15.00%; at 24.99% the rate is 14.99%, unrounded 14.9940% — displays 14.99% but is below the 15.00% target); largest retention (to the hundredth) for the growth rate to STAY at or below 8.00% is 40.00% (at 40.00% the rate is 8.00%, exactly 8.00%; at 40.01% the rate is 8.00%, unrounded 8.0020% — displays 8.00% but is above the 8.00% target); smallest return on equity (to the hundredth) for the growth rate to REACH 8.00% is 13.34% (at 13.34% the rate is 8.00%, unrounded 8.0040% — displays 8.00% but is above the 8.00% target; at 13.33% the rate is 8.00%, unrounded 7.9980% — displays 8.00% but is below the 8.00% target). Defaults: Retention 60.00%; return on equity 20.00%; sustainable growth rate 12.00%; maximum next-year sales $1,120,000.00 (from $1,000,000.00 of sales); retention needed for the 10.00% target 50.00%; return on equity needed for the 10.00% target 16.67% Bright Side Kit. "Sustainable Growth Rate Calculator: How Fast Can You Grow" https://brightoolbox.com/sustainable-growth-rate-calculator/ Accessed October 27, 2026.
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Frequently asked questions
What is the sustainable growth rate?
Retention × return on equity, divided by 100. On 60.00% retention and 20.00% return on equity the rate is 12.00% — the fastest the company can grow its sales from its own profit, without new money.
How do I calculate the sustainable growth rate?
Multiply the retention ratio by the return on equity and divide by 100. 60.00% × 20.00% ÷ 100 = 12.00%.
What does a 12.00% sustainable growth rate mean?
The company can grow its sales by 12% a year from its own profit. $1,000,000.00 of sales can grow to $1,120,000.00 without new money.
How much retention do I need for a 10.00% growth rate?
50.00% retention at a 20.00% return on equity. The smallest retention for the growth rate to reach 10.00% is 50.00%. At 50.00% the rate is 10.00%, exactly 10.00%.
How much return on equity do I need for a 10.00% growth rate?
16.67% return on equity at 60.00% retention. The return on equity needed for a 10.00% target is 16.67% (exact 16.6667%) — and the forward at the displayed 16.67% is 10.0020%, which displays as 10.00% but is above the 10.00% target.
What if retention is zero?
The rate is 0.00%. At 0.00% retention the rate is 0.00% — nothing kept, so nothing to grow with.
What does a negative sustainable growth rate mean?
The company paid out more than it earned or lost money on its equity. At −20.00% retention the rate is −4.00% — the company is shrinking its own capital base — and the calculator shows the −4.00% figure with a note, never hides it.
What happens if a company grows faster than its sustainable growth rate?
It needs outside money. Growing faster than the rate needs new shares, which dilute existing owners, or new debt, which adds interest and risk — or the rate itself must rise.