Sustainable Growth Rate

The sustainable growth rate is the maximum growth rate, measured in sales, that a company can afford without adding extra external capital. The formula is:

SG = ${\frac {R*{Return\ on\ Equity}}{1-r*{ReturnonEquity}}}$

Where $R=Retentionrate=1-Dividendpayoutrate$

If the actual growth rate is bigger than the sustainable growth rate: Cash Absorber If the actual growth rate is smaller than sustainable growth rate: Cash Generator