Sustainable Growth RateAnalyzing Firms
A firm’s sustainable growth rate (SGR) is its maximum potential growth without the need for additional debt-based financing. If a firm chooses to exceed this growth rate they will need to acquire more financing. Their risk increases if they seek additional leverage, due to interest payments and potential loss of collateral or bankruptcy in the case of default.
Sustainable Growth Rate displays the relation between a firm’s growth rate and leverage needs. While indicating the maximum potential growth rate without leverage, you should note that SGR does not measure the potential for growth or assume the firm can successfully grow in the future. There are two common equations for Sustainable Growth Rate. The simplest one is:
Dilutions in equity will be created by selling stock from the firm’s treasury reserve of shares. This will be the most obvious solution if the firm cannot reach their target growth rate without acquiring more debt. They may also lower costs which won’t harm processes necessary for growth, or sell non-production related assets. The funds earned from these alternatives can be directed to whichever processes generate growth for the firm.
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International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
- Large Funds Currency Sentiment Readings
- List of Technical Indicators to Look For
- Occasional: Foregin Exchange Technicals Markups
American Markets Analysis:
- Summaries of American Economic Structure
- Performance of Major
- Federal Reserve Mandate versus Expectations
- Performance Indexes of U.S Economy
- Economically Correlated U.S Dollar Projections
- Large Trading Fund Index Sentiment Readings
- Market Wide Earnings Versus Valuations
- Fundamental Ranking of U.S Business Sectors
- Best and Worst Future Consensus Estimates
- Occasional: Firm Fundamental Strength Report
- List of Technicals to Look for While Trading
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