Question

Ocean co. just paid a dividend of $2 per share out of earnings of $4 per share. if the book value per share is $25, what is the sustainable growth rate (sgr)?

Answer 1

The sustainable growth rate (sgr) is 8 percent.

What is Sustainable growth rate?

• The highest rate of growth that a business or social enterprise may sustain without using more equity or debt to fund expansion is known as the sustainable growth rate (SGR).
• In other words, it is the rate at which the business may expand without borrowing money from other sources by using only its own internal earnings.
• The SGR aims to increase sales and revenue while reducing financial leverage.

A corporation can avoid financial trouble and excessive leverage by achieving the SGR. Get or compute the company's return on equity (ROE) first. By comparing net income to shareholders' equity, ROE assesses a company's profitability.

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