How this calculator works
Estimate growth supported by retained earnings while maintaining a stable return on beginning equity, dividend policy and debt-to-equity ratio. This is the beginning-equity convention, g = ROE × retention. It permits proportional borrowing to maintain leverage and assumes no new common equity is issued.
Formula
Retention = (net income - dividends) / net income. ROE = net income / beginning equity. Sustainable growth g = ROE × retention = (net income - dividends) / beginning equity.
Worked example
A 15% ROE with 60% retention supports 9% growth under these assumptions. Income of $100,000, dividends of $25,000 and beginning equity of $1,000,000 imply 10% ROE, 75% retention and 7.5% growth.
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Frequently asked questions
Does sustainable mean guaranteed?
No. This is a financing identity under stable assumptions. Sales growth, margins, asset needs and access to debt can change.
What if my ROE uses ending equity?
The equivalent ending-equity formula is g = b × ROE / (1 - b × ROE). Convert the equity convention before comparing results.
Can I enter dividends and net income?
Use the financial-statements mode to calculate retention and ROE from those amounts. It requires positive earnings and a payout no greater than earnings.