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id="toc-Relationship_between_revenue_growth,_total_shareholder_value_creation_and_profitability" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Relationship_between_revenue_growth,_total_shareholder_value_creation_and_profitability"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.1</span> <span>Relationship between revenue growth, total shareholder value creation and profitability</span> </div> </a> <ul id="toc-Relationship_between_revenue_growth,_total_shareholder_value_creation_and_profitability-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Base_strategies_and_growth_moves" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Base_strategies_and_growth_moves"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.2</span> <span>Base strategies and growth moves</span> </div> </a> <ul id="toc-Base_strategies_and_growth_moves-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-How_to_achieve_long-term_growth_in_the_sweet-spot_and_beyond" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#How_to_achieve_long-term_growth_in_the_sweet-spot_and_beyond"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.3</span> <span>How to achieve long-term growth in the sweet-spot and beyond</span> </div> </a> <ul id="toc-How_to_achieve_long-term_growth_in_the_sweet-spot_and_beyond-sublist" class="vector-toc-list"> <li id="toc-Preconditions" class="vector-toc-list-item vector-toc-level-3"> <a class="vector-toc-link" href="#Preconditions"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.3.1</span> <span>Preconditions</span> </div> </a> <ul id="toc-Preconditions-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Levers_and_strategy" class="vector-toc-list-item vector-toc-level-3"> <a class="vector-toc-link" href="#Levers_and_strategy"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.3.2</span> <span>Levers and strategy</span> </div> </a> <ul id="toc-Levers_and_strategy-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> </ul> </li> <li id="toc-Criticism" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Criticism"> <div class="vector-toc-text"> <span class="vector-toc-numb">3</span> <span>Criticism</span> </div> </a> <ul id="toc-Criticism-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-References" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#References"> <div class="vector-toc-text"> <span class="vector-toc-numb">4</span> <span>References</span> </div> </a> <ul id="toc-References-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Further_reading" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Further_reading"> <div class="vector-toc-text"> <span 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<div id="contentSub"><div id="mw-content-subtitle"><div class="cdx-message cdx-message--block cdx-message--warning mw-revision"><span class="cdx-message__icon"></span><div class="cdx-message__content"><div id="mw-revision-info"><p><b>This is an <a href="/wiki/Help:Page_history" title="Help:Page history">old revision</a> of this page, as edited by <span id="mw-revision-name"><a href="/wiki/Special:Contributions/41.168.8.36" class="mw-userlink mw-anonuserlink" title="Special:Contributions/41.168.8.36" data-mw-revid="915101017"><bdi>41.168.8.36</bdi></a> <span class="mw-usertoollinks">(<a href="/wiki/User_talk:41.168.8.36" class="mw-usertoollinks-talk" title="User talk:41.168.8.36">talk</a>)</span></span> at <span id="mw-revision-date">06:44, 11 September 2019</span><span id="mw-revision-summary"> <span class="comment">(<span class="autocomment"><a href="#From_a_financial_perspective">→<bdi dir="ltr">From a financial perspective</bdi></a></span>)</span></span>. The present address (URL) is a <a href="/wiki/Help:Permanent_link" title="Help:Permanent link">permanent link</a> to this revision, which may differ significantly from the <span class="plainlinks"><a class="external text" href="https://en.wikipedia.org/wiki/Sustainable_growth_rate">current revision</a></span>.</b></p><div id="revision-info-plain" style="display: none;">Revision as of 06:44, 11 September 2019 by <a href="/wiki/Special:Contributions/41.168.8.36" class="mw-userlink mw-anonuserlink" title="Special:Contributions/41.168.8.36" data-mw-revid="915101017"><bdi>41.168.8.36</bdi></a> <span class="mw-usertoollinks">(<a href="/wiki/User_talk:41.168.8.36" class="mw-usertoollinks-talk" title="User talk:41.168.8.36">talk</a>)</span> <span class="comment">(<span class="autocomment"><a href="#From_a_financial_perspective">→<bdi dir="ltr">From a financial perspective</bdi></a></span>)</span></div></div><div id="mw-revision-nav">(<a href="/w/index.php?title=Sustainable_growth_rate&diff=prev&oldid=915101017" title="Sustainable growth rate">diff</a>) <a href="/w/index.php?title=Sustainable_growth_rate&direction=prev&oldid=915101017" title="Sustainable growth rate">← Previous revision</a> | <a href="/wiki/Sustainable_growth_rate" title="Sustainable growth rate">Latest revision</a> (<a href="/w/index.php?title=Sustainable_growth_rate&diff=cur&oldid=915101017" title="Sustainable growth rate">diff</a>) | <a href="/w/index.php?title=Sustainable_growth_rate&direction=next&oldid=915101017" title="Sustainable growth rate">Newer revision →</a> (<a href="/w/index.php?title=Sustainable_growth_rate&diff=next&oldid=915101017" title="Sustainable growth rate">diff</a>)</div></div></div></div></div> <div id="mw-content-text" class="mw-body-content"><div class="mw-content-ltr mw-parser-output" lang="en" dir="ltr"><p>According to <a href="/wiki/Profit_impact_of_marketing_strategy" class="mw-redirect" title="Profit impact of marketing strategy">PIMS</a> (profit impact of marketing strategy), an important lever of business success is growth. Among 37 variables, growth is mentioned as one of the most important variables for success: market share, market growth, marketing expense to sales ratio<sup id="cite_ref-Lancaster2001_1-0" class="reference"><a href="#cite_note-Lancaster2001-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> or a strong market position.<sup id="cite_ref-Dibb2005_2-0" class="reference"><a href="#cite_note-Dibb2005-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> </p><p>The question how much growth is sustainable is answered by two concepts with different perspectives: </p> <ul><li>The <b>sustainable growth rate</b> (<b>SGR</b>) concept by Robert C. Higgins, describes optimal growth from a financial perspective assuming a given strategy with clear defined financial frame conditions/ limitations. Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy (target debt to equity ratio, target <a href="/wiki/Dividend_payout_ratio" title="Dividend payout ratio">dividend payout ratio</a>, target <a href="/wiki/Profit_margin" title="Profit margin">profit margin</a>, target ratio of <a href="/wiki/Total_assets" class="mw-redirect" title="Total assets">total assets</a> to <a href="/wiki/Net_sales" class="mw-redirect" title="Net sales">net sales</a>). This concept provides a comprehensive financial framework and formula for case/ company specific SGR calculations.<sup id="cite_ref-Higgins1977_3-0" class="reference"><a href="#cite_note-Higgins1977-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup></li> <li>The <b>optimal growth</b> concept by Martin Handschuh, Hannes Lösch, Björn Heyden et al. assesses sustainable growth from a total shareholder return creation and profitability perspective—independent of a given strategy, business model and/ or financial frame condition. This concept is based on statistical long-term assessments and is enriched by case examples. It provides an orientation frame for case/ company specific mid- to long-term growth target setting.<sup id="cite_ref-Boernsen2011_4-0" class="reference"><a href="#cite_note-Boernsen2011-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup></li></ul> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="From_a_financial_perspective">From a financial perspective</h2></div> <p>The sustainable growth rate is the maximum growth rate a company can achieve, consistent with its established <a href="/wiki/Financial_policy" class="mw-redirect" title="Financial policy">financial policy</a>. Several formulae are available here.<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> In general, these link long term profitability targets, <a href="/wiki/Dividend_policy" title="Dividend policy">dividend policy</a>, and <a href="/wiki/Capital_structure" title="Capital structure">capital structure</a> assumptions, returning the sustainable, long-run business growth-rate attainable as a function of these. These formulae then reflect the general requirement that all assumptions are internally consistent; see <a href="/wiki/Financial_modeling#Accounting" title="Financial modeling">Financial modeling #Accounting</a>. </p><p>A check on these inputs, and on the resultant growth number, is provided by a twofold economic argument. The <a href="/wiki/Microeconomic" class="mw-redirect" title="Microeconomic">microeconomic</a> argument: Where the risk adjusted <a href="/wiki/Return_on_capital" title="Return on capital">Return on capital</a> is significantly higher than achievable in other industries, then this success will attract <a href="/wiki/Competition_(economics)" title="Competition (economics)">competition</a>; in the long-run then, the company's returns will tend to those of its industry (in turn tending to the economy). The <a href="/wiki/Macroeconomic" class="mw-redirect" title="Macroeconomic">macroeconomic</a> check: The long-run growth of the company cannot exceed overall <a href="/wiki/Economic_growth" title="Economic growth">economic growth</a>; otherwise the company in question would eventually constitute the bulk of the economy. </p><p>An assumption re the company's sustainable growth rate is a required input to several valuation models - for instance the <a href="/wiki/Gordon_model" class="mw-redirect" title="Gordon model">Gordon model</a> and other <a href="/wiki/Discounted_cash_flow" title="Discounted cash flow">discounted cash flow</a> models - where this is used in the calculation of continuing or <a href="/wiki/Terminal_value_(finance)" title="Terminal value (finance)">terminal value</a>; see <a href="/wiki/Valuation_using_discounted_cash_flows" title="Valuation using discounted cash flows">Valuation using discounted cash flows</a>. A calculated growth rate can also act a check as to whether business plans are reasonable. </p><p>The sustainable growth rate may be returned via the following formula: <sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup> </p><p><b>SGR = (pm*(1-d)*(1+L)) / (T-(pm*(1-d)*(1+L)))</b> </p> <ul><li>pm is the existing and target profit margin</li> <li>d is the target dividend payout ratio</li> <li>L is the target total debt to equity ratio</li> <li>T is the ratio of total assets to sales</li></ul> <p>Note that the model presented here, assumes several simplifications: the <a href="/wiki/Profit_margin" title="Profit margin">profit margin</a> remains stable; the proportion of assets and sales remains stable; related, the value of existing assets is maintained after <a href="/wiki/Depreciation" title="Depreciation">depreciation</a>; the company maintains its current capital structure and dividend payout policy. See <a href="/wiki/Stock_valuation#Growth_rate" title="Stock valuation">Stock valuation #Growth rate</a>; <a href="/wiki/Earnings_growth" title="Earnings growth">Earnings growth</a>. </p> <div class="mw-heading mw-heading2"><h2 id="Optimal_growth_rates_from_a_total_shareholder_value_creation_and_profitability_perspective">Optimal growth rates from a total shareholder value creation and profitability perspective</h2></div> <p><b>Optimal Growth</b> according to Martin Handschuh, Hannes Lösch and Björn Heyden is the growth rate which assures sustainable company development – considering the long-term relationship between revenue growth, total <a href="/wiki/Shareholder_value" title="Shareholder value">shareholder value</a> creation and profitability. Assessment basis: The work is based on assessments on the performance of more than 3500 stock-listed companies with an initial revenue of greater 250 million Euro globally and across industries over a period of 12 years from 1997 till 2009. Due to this long time period, the authors consider their findings as to a large extent independent of specific economic cycles.<sup id="cite_ref-Boernsen2011_4-1" class="reference"><a href="#cite_note-Boernsen2011-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading3"><h3 id="Relationship_between_revenue_growth,_total_shareholder_value_creation_and_profitability"><span id="Relationship_between_revenue_growth.2C_total_shareholder_value_creation_and_profitability"></span>Relationship between revenue growth, total shareholder value creation and profitability</h3></div> <p>In the long-term and across industries, total shareholder value creation (stock price development plus dividend payments) rises steadily with increasing revenue growth rates. The more long-term revenue growth companies realize, the more investors appreciate this and the more they get rewarded. </p><p><span class="mw-default-size" typeof="mw:File"><a href="/wiki/File:Graf1_revenue.JPG" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/f/f2/Graf1_revenue.JPG" decoding="async" width="670" height="503" class="mw-file-element" data-file-width="670" data-file-height="503" /></a></span> </p><p><a href="/wiki/Return_on_assets" title="Return on assets">Return on assets</a> (ROA), <a href="/wiki/Return_on_sales" class="mw-redirect" title="Return on sales">return on sales</a> (ROS) and <a href="/wiki/Return_on_equity" title="Return on equity">return on equity</a> (ROE) do rise with increasing revenue growth up to 10 to 25% and then fall with further increasing revenue growth rates. </p><p><span class="mw-default-size" typeof="mw:File"><a href="/wiki/File:Graf2_profitability.JPG" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/2/29/Graf2_profitability.JPG" decoding="async" width="669" height="502" class="mw-file-element" data-file-width="669" data-file-height="502" /></a></span> </p><p>Also the combined ROX-index (average of ROA, ROS and ROE) shows rises with increasing growth rates to a broad maximum in the range of 10 to 25% revenue growth per year and falls towards higher growth rates. </p><p><span class="mw-default-size" typeof="mw:File"><a href="/wiki/File:Graf3_rox.JPG" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/1/13/Graf3_rox.JPG" decoding="async" width="668" height="503" class="mw-file-element" data-file-width="668" data-file-height="503" /></a></span> </p><p>The authors attribute the continuous profitability increase towards the maximum of two effects: </p> <ol><li><b>Profitability drives growth: </b> Companies with substantial profitability have the opportunity to invest more in additional growth.</li> <li><b>Growth drives profitability: </b> Substantial growth may be a driver for additional profitability, e.g. by higher attractiveness for high performing young professionals, higher employee motivation, higher attractiveness for business partners as well as higher self-confidence.</li></ol> <p>Beyond the profitability maximum extra efforts to handle additional growth – e.g. based on integrating new staff in large dimensions and handling culture and quality - do rise sharply and reduce overall profitability. </p><p>The combination of the patterns of revenue growth, total shareholder value creation and profitability indicates three growth zones: </p><p><span class="mw-default-size" typeof="mw:File"><a href="/wiki/File:Graf4_zones_of_growth.JPG" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/1/1c/Graf4_zones_of_growth.JPG" decoding="async" width="669" height="504" class="mw-file-element" data-file-width="669" data-file-height="504" /></a></span> </p> <ul><li><b>Low Return: </b> Low profitability and low value generation below 10% per year</li> <li><b>Long-term Sweet-Spot: </b> Solid value generation and highest on average profitability in the revenue growth interval from 10% to 25% per year</li> <li><b>High Speed: </b> Even higher total shareholder value generation however in combination with lower profitability beyond 25% per year</li></ul> <p>Growth rates of the assessed companies are widely independent of initial company size/ market share which is in alignment with <a href="/wiki/Gibrat%27s_law" title="Gibrat's law">Gibrat's law</a>. Gibrat's law, sometimes called Gibrat's rule of proportionate growth is a rule defined by <a href="/w/index.php?title=Robert_Gibrat&action=edit&redlink=1" class="new" title="Robert Gibrat (page does not exist)">Robert Gibrat</a> (1904–1980) stating that the size of a firm and its growth rate are independent. Independent of industry consolidation and industry growth rate, companies in many industries with growth rates in the range of 10 to 25% revenue growth p.a. have both, higher total shareholder value generation as well as profitability than their slower growing peers. </p> <div class="mw-heading mw-heading3"><h3 id="Base_strategies_and_growth_moves">Base strategies and growth moves</h3></div> <p>These findings do suggest two base strategies for companies: </p> <ul><li>For companies (e.g. in established markets like central Europe and USA) with low single digit growth rates: Consider acceleration of growth given the fact that TSR and profitability are higher in the sweet-spot</li> <li>For companies (e.g. in fast growing regional markets like China with India and/ or rapidly growing industry segments) with growth rates beyond 25%: Consider best ways to “digest”/ and to stabilize rapid growth and ensure a “soft landing” should market growth come to a sudden stop.</li></ul> <div class="mw-heading mw-heading3"><h3 id="How_to_achieve_long-term_growth_in_the_sweet-spot_and_beyond">How to achieve long-term growth in the sweet-spot and beyond</h3></div> <p>The authors have identified a set of preconditions and levers to achieve long-term growth in their defined sweet-spot and beyond: </p> <div class="mw-heading mw-heading4"><h4 id="Preconditions">Preconditions</h4></div> <ul><li>Generating a common understanding regarding growth and profit ambitions among the management team as a prerequisite for aligned and coordinated strategy development and implementation</li> <li>Understanding relevant markets (current or future promising markets). Generating market foresight when identifying and assessing growth initiatives, e.g. <a href="/wiki/Megatrends" class="mw-redirect" title="Megatrends">megatrends</a> and <a href="/w/index.php?title=Scenario_analyses&action=edit&redlink=1" class="new" title="Scenario analyses (page does not exist)">scenario analyses</a>, segment specific <a href="/wiki/Benchmarking" title="Benchmarking">benchmarking</a> and in depth assessments, market demand projections</li></ul> <div class="mw-heading mw-heading4"><h4 id="Levers_and_strategy">Levers and strategy</h4></div> <ul><li>Applying formulas for rapid growth, e.g. maxing out the number of relevant customers, maxing out the share of wallet and lifecycle potentials, continuous innovation, killer offerings, network based growth, M&A/buy-and-build driven growth, franchising proven business concepts, pyramid-like network expansion and managing value networks</li> <li>Defining the growth strategy as a portfolio of best suited growth initiatives considering a multidimensional set of criteria, e.g. ease of implementation, growth and profit impact, expected risk vs. return, <a href="/wiki/Cash_flow" title="Cash flow">cash flow</a> stability</li> <li>Making growth happen: Strategy and corresponding culture must be addressed in a consistent way, e.g. <a href="/wiki/Change_management" title="Change management">creating the case for growth</a>, clearly defining and communicating vision and strategy as well as actively developing and energizing the organization.<sup id="cite_ref-Boernsen2011_4-2" class="reference"><a href="#cite_note-Boernsen2011-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup></li></ul> <div class="mw-heading mw-heading2"><h2 id="Criticism">Criticism</h2></div> <p>As described the sustainable growth rate (SGR) concept by Robert C. Higgins is based on several assumptions such as constant <a href="/wiki/Profit_margin" title="Profit margin">profit margin</a>, constant <a href="/wiki/Debt_to_equity_ratio" class="mw-redirect" title="Debt to equity ratio">debt to equity ratio</a> or constant asset to sales ratio. Therefore, general applicability of SGR concept in cases where these parameters are not stable is limited. </p><p>The Optimal Growth concept by Martin Handschuh, Hannes Lösch, Björn Heyden et al. has no restrictions to certain strategies or business model and is therefore more flexible in its applicability. However, as a broad framework, it only provides an orientation for case/company specific mid- to long-term growth target setting. Additional company and market specific considerations, e.g. market growth, growth culture, appetite for change, are required to come up with the optimal growth rate of a specific company. </p><p>Additionally, considering the increasing criticism of excessive growth and shareholder value orientation by philosophers, economists and also managers, e.g. <a href="/wiki/St%C3%A9phane_Hessel" title="Stéphane Hessel">Stéphane Hessel</a>, <a href="/wiki/Kenneth_Boulding" class="mw-redirect" title="Kenneth Boulding">Kenneth Boulding</a>, <a href="/wiki/Jack_Welch" title="Jack Welch">Jack Welch</a> (nowadays), one might expect that investors' investment criteria might also change in the future. This may lead to changes in the relationship of revenue growth rates and total shareholder value creation. Regular reviews of the optimal growth assessments may be used as an indicator for the development of stock markets` appetite for rapid growth. </p> <div class="mw-heading mw-heading2"><h2 id="References">References</h2></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist"> <div class="mw-references-wrap"><ol class="references"> <li id="cite_note-Lancaster2001-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-Lancaster2001_1-0">^</a></b></span> <span class="reference-text">Lancaster, Geoff; Massingham, Lester; Ashford, Ruth (2001): Essentials of Marketing: Text and Cases, Mcgraw-Hill Higher Education, p. 535</span> </li> <li id="cite_note-Dibb2005-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-Dibb2005_2-0">^</a></b></span> <span class="reference-text">Dibb, Sally; Simkin, Lyndon; Pride, William (2005): Marketing.Concepts and Strategies, 5th edition, Houghton Mifflin, p. 676</span> </li> <li id="cite_note-Higgins1977-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-Higgins1977_3-0">^</a></b></span> <span class="reference-text">Higgins, Robert (1977): How much growth can a firm afford, Financial Management 6 (3) p. 7-16</span> </li> <li id="cite_note-Boernsen2011-4"><span class="mw-cite-backlink">^ <a href="#cite_ref-Boernsen2011_4-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Boernsen2011_4-1"><sup><i><b>b</b></i></sup></a> <a href="#cite_ref-Boernsen2011_4-2"><sup><i><b>c</b></i></sup></a></span> <span class="reference-text">Börnsen, Arne; Körner, Florian (2011): Optimal Growth, Conceptualization of a strategy to benefit from Optimal Growth, Mannheim Business School</span> </li> <li id="cite_note-5"><span class="mw-cite-backlink"><b><a href="#cite_ref-5">^</a></b></span> <span class="reference-text">See for example, <a rel="nofollow" class="external text" href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=256987">Valuing Companies by Cash Flow Discounting: Ten Methods and Nine Theories</a>, Pablo Fernandez: University of Navarra - IESE Business School</span> </li> <li id="cite_note-6"><span class="mw-cite-backlink"><b><a href="#cite_ref-6">^</a></b></span> <span class="reference-text">Chapter 4 in <style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite id="CITEREFRobert_C._Higgins2018" class="citation book cs1">Robert C. Higgins (2018). <i>Analysis for Financial Management (12th Edition)</i>. <a href="/wiki/McGraw-Hill" class="mw-redirect" title="McGraw-Hill">McGraw-Hill</a>. <a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/978-1259918964" title="Special:BookSources/978-1259918964"><bdi>978-1259918964</bdi></a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=Analysis+for+Financial+Management+%2812th+Edition%29&rft.pub=McGraw-Hill&rft.date=2018&rft.isbn=978-1259918964&rft.au=Robert+C.+Higgins&rfr_id=info%3Asid%2Fen.wikipedia.org%3ASustainable+growth+rate" class="Z3988"></span></span> </li> </ol></div></div> <div class="mw-heading mw-heading2"><h2 id="Further_reading">Further reading</h2></div> <ul><li>Fonseka, Mohan; Tian, Gaoloang (2011): The most appropriate Sustainable Growth Rate (SGR) Model for Managers and Researchers, American Accounting Association</li> <li>Graeme, Deans; Kroeger, Fritz (2004): <i>Stretch!: How Great Companies Grow in Good Times and Bad</i>, John Wiley & Sons</li> <li>Handschuh, Martin (2011): What we can learn from self-made billionaires?, WHU Otto Beisheim School of Management lecture</li> <li>Handschuh, Martin; Lösch, Hannes (2011): Optimal Growth – Does it exist and if so how to realize it?, Mannheim Business School lecture</li> <li>Handschuh, Martin; Reinartz, Sebastian; Heyden, Björn (2011): Megafusionen als Lehrbuch, M&A Review 05/2011</li> <li>Higgins, Robert (1981): Sustainable growth under inflation, Financial Management 10 (4) p. 36-40</li> <li>Jonk, Gillis (2006): Resources for Growth, published in: executive agenda, ideas and insights for business leaders, volume IX, Number 1, 2006, A.T. Kearney</li> <li>Lösch, Hannes (2017): <a rel="nofollow" class="external text" href="http://diglib.uibk.ac.at/ulbtirolhs/content/titleinfo/2341624?lang=de">The high-growth company: Perils of excessive growth</a>, Master thesis University of Innsbruck</li> <li>Lösch, Hannes (2018): <a rel="nofollow" class="external text" href="https://limendo.com/optimales-wachstum/">Optimal Growth: Optimales Wachstum erhöht Ihren Unternehmenserfolg und steigert Ihren Wert</a>.</li> <li>Neumann, Dietrich; Sonnenschein, Martin; Schumacher, Nikolas (2003): Fünf Wege zu organischem Wachstum: Wie Unternehmen antizyklischen Erfolg programmieren können, campus Verlag</li> <li>Slywotzky, Adrian; Wise, Richard; Weber, Karl (2004): <i>How to Grow When Markets Don’t: Discovering the New Drivers for Growth</i></li> <li>Sonnenschein, Martin (2011): <i>Innovation and Growth in Volatile Times</i>, Stuttgarter Strategieforum</li> <li>Velthius, Carol (2010): <i>Surfing the Long Summer: How Market Leaders Grow Faster Than Their Markets, Infinite Ideas</i></li> <li>Zook, Chris (2007): <i><a href="/wiki/Unstoppable:_Finding_Hidden_Assets_to_Renew_the_Core_and_Fuel_Profitable_Growth" class="mw-redirect" title="Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth">Unstoppable: Finding Hidden Assets to Renew the Core and Fuel Profitable Growth</a></i>; Mcgraw-Hill Professional</li> <li>Zook, Chris; Allen, James (2010): <i>Profit from the Core: A Return to Growth in Turbulent Times</i>; Harvard Business Press</li></ul> <div class="navbox-styles"><style data-mw-deduplicate="TemplateStyles:r1129693374">.mw-parser-output .hlist dl,.mw-parser-output .hlist ol,.mw-parser-output .hlist ul{margin:0;padding:0}.mw-parser-output .hlist dd,.mw-parser-output .hlist dt,.mw-parser-output .hlist li{margin:0;display:inline}.mw-parser-output .hlist.inline,.mw-parser-output .hlist.inline dl,.mw-parser-output .hlist.inline ol,.mw-parser-output .hlist.inline ul,.mw-parser-output .hlist dl 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]"}.mw-parser-output .navbar li{word-spacing:-0.125em}.mw-parser-output .navbar a>span,.mw-parser-output .navbar a>abbr{text-decoration:inherit}.mw-parser-output .navbar-mini abbr{font-variant:small-caps;border-bottom:none;text-decoration:none;cursor:inherit}.mw-parser-output .navbar-ct-full{font-size:114%;margin:0 7em}.mw-parser-output .navbar-ct-mini{font-size:114%;margin:0 4em}html.skin-theme-clientpref-night .mw-parser-output .navbar li a abbr{color:var(--color-base)!important}@media(prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .navbar li a abbr{color:var(--color-base)!important}}@media print{.mw-parser-output .navbar{display:none!important}}</style><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Financial_ratios" title="Template:Financial ratios"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Financial_ratios" title="Template talk:Financial ratios"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Financial_ratios" title="Special:EditPage/Template:Financial ratios"><abbr title="Edit this template">e</abbr></a></li></ul></div><div id="Financial_ratios" style="font-size:114%;margin:0 4em"><a href="/wiki/Financial_ratio" title="Financial ratio">Financial ratios</a></div></th></tr><tr><td colspan="2" class="navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Buffett_indicator" title="Buffett indicator">Buffett indicator</a></li> <li><a href="/wiki/Cyclically_adjusted_price-to-earnings_ratio" title="Cyclically adjusted price-to-earnings ratio">Cyclically adjusted price-to-earnings</a> (CAPE)</li> <li><a href="/wiki/Capitalization_rate" title="Capitalization rate">Capitalization rate</a> (Cap Rate)</li> <li><a href="/wiki/CROCI" class="mw-redirect" title="CROCI">Cash return on cash invested</a> (CROCI)НТЦв</li> <li><a href="/wiki/Debt-to-equity_ratio" title="Debt-to-equity ratio">Debt-to-equity</a> (D/E)</li> <li><a href="/wiki/Dividend_cover" title="Dividend cover">Dividend cover</a></li> <li><a href="/wiki/Dividend_payout_ratio" title="Dividend payout ratio">Dividend payout</a></li> <li><a href="/wiki/Earnings_yield" title="Earnings yield">Earnings yield</a> (E/P)</li> <li><a href="/wiki/EV/EBITDA" class="mw-redirect" title="EV/EBITDA">Enterprise value/EBITDA</a> (EV/EBITDA)</li> <li><a href="/wiki/EV/GCI" title="EV/GCI">Enterprise value/gross cash invested</a> (EV/GCI)</li> <li><a href="/wiki/EV/Sales" class="mw-redirect" title="EV/Sales">Enterprise value/sales</a> (EV/Sales)</li> <li><a href="/wiki/Loan-to-value_ratio" title="Loan-to-value ratio">Loan-to-value</a> (LTV)</li> <li><a href="/wiki/Omega_ratio" title="Omega ratio">Omega</a></li> <li><a href="/wiki/Operating_margin" title="Operating margin">Operating margin</a></li> <li><a href="/wiki/P/B_ratio" title="P/B ratio">Price-to-book</a> (P/B)</li> <li><a href="/wiki/Present_value_of_growth_opportunities" title="Present value of growth opportunities">Present value of growth opportunities</a> (PVGO)</li> <li><a href="/wiki/Price/cash_flow_ratio" class="mw-redirect" title="Price/cash flow ratio">Price/cash flow</a> (P/CF)</li> <li><a href="/wiki/Price%E2%80%93earnings_ratio" title="Price–earnings ratio">Price-earnings</a> (P/E)</li> <li><a href="/wiki/PEG_ratio" title="PEG ratio">Price-earnings to growth</a> (PEG)</li> <li><a href="/wiki/Price%E2%80%93sales_ratio" title="Price–sales ratio">Price-sales</a> (P/S)</li> <li><a href="/wiki/Profit_margin" title="Profit margin">Profit margin</a></li> <li><a href="/wiki/Return_on_assets" title="Return on assets">Return on assets</a> (ROA)</li> <li><a href="/wiki/Return_on_net_assets" title="Return on net assets">Return on net assets</a> (RONA)</li> <li><a href="/wiki/Return_on_capital" title="Return on capital">Return on capital</a> (ROC)</li> <li><a href="/wiki/Return_on_capital_employed" title="Return on capital employed">Return on capital employed</a> (ROCE)</li> <li><a href="/wiki/Return_on_equity" title="Return on equity">Return on equity</a> (ROE)</li> <li><a href="/wiki/Return_on_tangible_equity" title="Return on tangible equity">Return on tangible equity</a> (ROTE)</li> <li><a href="/wiki/Risk-adjusted_return_on_capital" title="Risk-adjusted return on capital">Risk-adjusted return on capital</a> (RAROC)</li> <li><a href="/wiki/Risk_return_ratio" class="mw-redirect" title="Risk return ratio">Risk return</a> (RRR)</li> <li><a href="/wiki/Sharpe_ratio" title="Sharpe ratio">Sharpe</a></li> <li><a href="/wiki/Short_interest_ratio" title="Short interest ratio">Short interest</a> (SIR)</li> <li><a href="/wiki/Sortino_ratio" title="Sortino ratio">Sortino</a></li> <li><a class="mw-selflink selflink">Sustainable growth</a> (SGR)</li> <li><a href="/wiki/Treynor_ratio" title="Treynor ratio">Treynor</a></li></ul> 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