Sustainable Growth Rate on the Example of Anheuser-Bush Essay

Sustainable growth is the rate in which a company grows without running into problems. Growth can either move fast or it can move slow, both can impact the company tremendously. The goal of any company is to find an optimal growth rate. When a company grows to quickly it is likely to run into difficulties when it comes to funding the growth and a company that grows to slowly may languish. In order to determine how much a company can grow before it must borrow money you must figure the sustainable growth rate (SGR). The company I chose is Anheuser-Busch (BUD). To configure the SGR for this company I had to first find the ROE which was 11.96 after finding this I next needed to find out the payout ratio for this company which was 169.24. After finding these two numbers I then had to plug them into the formula 0.1196 x (1-1.6924) 0.1196x0.69240.08288.28. Once I solved the equation I determined that the sustainable growth rate for this company was 8.28 the actual average growth rate for this company is 6.46 so the company was within the range of its SGR. If the company would have surpassed its sustainable growth rate with its actual growth the company would not have been able to financially support the growth. In the instance a company cannot financially support its growth several different scenarios can take place. Of course the company could eventually go under due to lack of funding but the big option here for staying afloat in the ever demanding world is investors. A company can always look for new or more investors to invest money into the company to help fund its growth. Both of these options are not ideal but they are a factor when a company exceeds its SGR. Now if a company doesnt come close to its SGR then its becoming stagnant which is just as painful for a company to experience. ReferenceAnheuser-Busch...

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