FINC Unit 4

How does a company assess its sustainable growth rate (SGR)? 

• How does a firm use the SGR in decision making? 

What are the consequences for a firm that grows a higher rate than its SGR? 

• What are the consequences for a firm that grows at a lower rate than its SGR?

  Consider the following ideas to include in your answer:

 • Which variables are used in calculating the SGR? 

• How does a firm use the SGR in choosing a financing option? 

• How does a firm finance a growth that is higher than its SGR?

 • What is the opportunity cost for a firm that grows at a lower rate than its SGR?