Internal Growth Rate Calculator

✖Retention Ratio is the proportion of earnings that is retained in the business rather than paid out as dividends.ⓘ Retention Ratio [RR]			+10% -10%
✖Return on Assets is the ratio of net income to total assets, indicating how effectively a company uses its assets to generate profits.ⓘ Return on Assets [ROA]			+10% -10%

✖Internal Growth Rate represents the rate at which a company can grow using only its retained earnings to fund the growth.ⓘ Internal Growth Rate [IGR]

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Formula

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Internal Growth Rate

Formula

`"IGR" = "RR"*"ROA"`

Example

`"17.5"="0.5"*"35"`

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Internal Growth Rate Solution

STEP 0: Pre-Calculation Summary

Formula Used

Internal Growth Rate = Retention Ratio*Return on Assets
IGR = RR*ROA
This formula uses 3 Variables

Variables Used

Internal Growth Rate - Internal Growth Rate represents the rate at which a company can grow using only its retained earnings to fund the growth.
Retention Ratio - Retention Ratio is the proportion of earnings that is retained in the business rather than paid out as dividends.
Return on Assets - Return on Assets is the ratio of net income to total assets, indicating how effectively a company uses its assets to generate profits.

STEP 1: Convert Input(s) to Base Unit

Retention Ratio: 0.5 --> No Conversion Required
Return on Assets: 35 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

IGR = RR*ROA --> 0.5*35

Evaluating ... ...

IGR = 17.5

STEP 3: Convert Result to Output's Unit

17.5 --> No Conversion Required

FINAL ANSWER

17.5 <-- Internal Growth Rate

(Calculation completed in 00.004 seconds)

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Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has created this Calculator and 200+ more calculators!

Verified by Aashna

IGNOU (IGNOU), India

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Seller's Discretionary Earnings

Go Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses

Amortization of Intangible Assets

Go Amortization Expense = (Historical Cost of Intangible Asset-Residual Value)/Useful Life Assumption

Cash Available for Distribution

Go Cash Available for Distribution = Funds from Operations+Non-Recurring Items-Capital Expenditures

Residual Income

Go Residual Income = Operating Income-Minimum Required Rate of Return*Average Operating Assets

Net Capital Spending

Go Net Capital Spending = Ending Net Fixed Assets-Beginning Net Fixed Assets+Depreciation

Capital Structure

Go Capital Structure = Common Equity Weight+Debt Weight+Preferred Stock Weight

Allowance Method of Doubtful Accounts

Go Net Accounts Receivables = Gross Accounts Receivables-Allowance for Doubtful Accounts

Operating Working Capital

Go Operating Working Capital = Operating Current Assets-Operating Current Liabilities

Inventory Write-Down

Go Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value

Net Realizable Value

Go Lower of Cost or Net Realizable Value = Expected Sale Price-Disposal Costs

Net Identifiable Assets

Go Net Identifiable Assets = Identifiable Assets-Total Liabilities

Expense Ratio

Go Expense Ratio = Annual Operating Expenses/Average Fund Assets

Inventory Days

Go Inventory Days = (Average Inventory/Cost Of Goods Sold)*365

Basic Earnings Power Ratio

Go Basic Earnings Power Ratio = Operating Income/Total Assets

Internal Growth Rate

Go Internal Growth Rate = Retention Ratio*Return on Assets

Depreciable Cost of Asset

Go Depreciable Cost = Purchase Cost-Salvage Value

Conversion Price

Go Conversion Price = Par Value/Conversion Ratio

Internal Growth Rate Formula

Internal Growth Rate = Retention Ratio*Return on Assets
IGR = RR*ROA

What is Internal Growth Rate?

Internal Growth Rate provides valuable insights into a company's ability to grow organically without relying on external sources of funding, such as issuing new equity or taking on additional debt. It indicates the company's self-sustainability and financial health, as a higher IGR suggests that the company can generate enough internal funds to support its growth initiatives.

However, it's important to note that the IGR assumes that the company's profitability (ROA) and retention ratio remain constant. In reality, these factors can fluctuate due to changes in the business environment, competitive pressures, or management decisions.

Investors and analysts often use the Internal Growth Rate to assess the growth potential of a company and compare it with its actual growth rate. If a company's actual growth rate exceeds its IGR, it may indicate that the company is effectively utilizing external financing or improving its operational efficiency to support higher growth.

How to Calculate Internal Growth Rate?

Internal Growth Rate calculator uses Internal Growth Rate = Retention Ratio*Return on Assets to calculate the Internal Growth Rate, The Internal Growth Rate is a financial metric that measures the maximum rate at which a company can grow its sales revenue without requiring external financing. Internal Growth Rate is denoted by IGR symbol.

How to calculate Internal Growth Rate using this online calculator? To use this online calculator for Internal Growth Rate, enter Retention Ratio (RR) & Return on Assets (ROA) and hit the calculate button. Here is how the Internal Growth Rate calculation can be explained with given input values -> 17.5 = 0.5*35.

FAQ

What is Internal Growth Rate?

The Internal Growth Rate is a financial metric that measures the maximum rate at which a company can grow its sales revenue without requiring external financing and is represented as IGR = RR*ROA or Internal Growth Rate = Retention Ratio*Return on Assets. Retention Ratio is the proportion of earnings that is retained in the business rather than paid out as dividends & Return on Assets is the ratio of net income to total assets, indicating how effectively a company uses its assets to generate profits.

How to calculate Internal Growth Rate?

The Internal Growth Rate is a financial metric that measures the maximum rate at which a company can grow its sales revenue without requiring external financing is calculated using Internal Growth Rate = Retention Ratio*Return on Assets. To calculate Internal Growth Rate, you need Retention Ratio (RR) & Return on Assets (ROA). With our tool, you need to enter the respective value for Retention Ratio & Return on Assets and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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