Internal Growth Rate (IGR) Calculator

Posted by Dinesh on

Use the simple finance calculator tool that helps you to calculate the internal growth rate (IGR) for your leverage problems. The Internal growth rate of a company means a maximum rate per year a company can grow without external financing, while the sustainable growth rate means a maximum rate per year a company can grow without equity financing by maintaining a constant debt equity ratio.

What is this firm's Internal Growth rate (IGR)?

To measure a firm's IGR we must establish its retention ratio or 'b'. The retention ratio ((Net Income Dividends Paid) / Net Income) and is simply a ratio of the retained earnings (Net Income Dividends Paid) to Net Income.

What is the functional difference between a firm's IGR and SGR?

The IGR informs us of the rate of growth a firm can attain via internal resources (accumulated retained earnings and existing productive capital assets), while the SGR lets us know what type of growth the firm might be able to sustain over time with given its equity capital structure and ability to attract debt financing, while keeping its debt ratio constant.

IGR (Internal Growth Rate) Calculation

Return on assets :
Retained earning rate :
Internal Growth Rate :

Formula:

IGR = (ROA × b) / (1 - ROA × b)

where,
  • ROA - The Return on Assets - is the annual net profit divided by the average book value of assets at the beginning and end of the year.
  • b - retained earning rate
  • IGR - internal growth rate