What is the Sustainable Growth for a Business?
David de Closey
Management Accountant | Financial Management Accountant | Business Accountant | Accounting Specialist | Xero Specialist
I’m always happy to pass on great info...and this is great info! I’ve included a few snippets below lifted from the full article.
Businesses see growth as a good thing. The more and the faster a business can growth the better. Right? Not necessarily. In order for a business to grow and not run into problems with financing, it has to grow at a sustainable growth rate. Why? Businesses have to be able to finance their growth with either debt or equity financing. If they do not have enough financing, but they have runaway growth, they may find it difficult to get financing to sustain that growth.
On the other hand, a business that grows too slowly will stagnate.
What is the Sustainable Growth Rate
The sustainable growth rate in a business is the maximum growth rate a business can achieve without having to increase its financial leverage or debt financing. Stated another way, it is the maximum growth rate that can be achieved given the company's profitability, asset utilization, dividend payout, and debt ratios.
Do you need more detail on this subject? Head on over to the full article https://www.thebalance.com/what-is-the-sustainable-growth-for-a-business-393231 for more ideas and perspective. Afterwards, why not drop me an email to share your thoughts [email protected]; or call me on (0412) 088-874.