write thw difference between sustainable and rapid growth rate.
Answers
Explanation:
Sustainable Vs Rapid Growth: What Should Companies Prefer For Long-Term Success?
RESOURCES
The company’s return on equity contributes to its calculation of sustainable growth rate
The rapid growth of ecommerce has changed the concepts of sustainability
Sustainable growth is about achieving a fine balance between survival and scale-up
Sustainable vs. Rapid growth: What Should Companies Prefer for Long-term success?
Sustainable growth is integral to the success of a business. Irrespective of the size of the enterprise at inception, realistic goals of achieving a stable and predictable growth rate can foster long-term survival of a business.
Although profits determine the growth rate of a business, a rapidly growing one may end up risking its resources in the long haul. On the other hand, an operation that grows too slowly experiences high risks of stagnation.
Sustainable growth rate refers to the maximum rate of growth that an enterprise can maintain without increasing its financial leverage.
Currently, experts rely on three assumptions to calculate the sustainable growth rate of a company –
The company aims to sustain its capital without the issuance of new funds
The business wants to pay a predetermined percentage of earnings to its shareholders
The business owner(s) also wants to boost sales in accordance with market conditions
Therefore, the sustainable growth rate is the safest rate of growth and expansion a company can sustain without increasing its financial leverage.
The company’s return on equity contributes to its calculation of sustainable growth rate. For calculating the same, experts also consider its dividend payment ratio. The sustainable growth rate of a company is the maximum growth in sales the company can achieve without using up its operating funds.