ACCOUNTING MEASUREMENT Definition

ACCOUNTING MEASUREMENT AND DISCLOSURE is the concepts of measurement and information disclosure required for decision making.

Learn new Accounting Terms

ENTITY CONCEPT is the concept that financial accounting and reporting relates only to the activities of a specific business entity and not to the activities of the owners of that entity.

SUSTAINABLE GROWTH RATE (SGR) shows how fast a company can grow using internally generated assets without issuing additional debt or equity. SGR provides a useful benchmark for judging a companys appropriate rate of growth. A company with a low sustainable growth rate but lots of opportunities for expansion will have to fund that growth via outside sources, which could lower profits and perhaps strain the companys finances. Growth can be a major dilemma because with growth comes a spontaneously generated need for increased working capital. VentureLine calculates a Sustainable Growth Rate from the data entered into the Income Statement and Balance Sheet. The Sustainable Growth Rate is the rate at which the firm may grow the Stockholders Equity Account (Net Worth) using only increases in Retained Earnings (Net Profits contribution to retained earnings) to fund the growth. Growth beyond this amount will force the firm to obtain additional financing from external sources to finance growth. Formula: SGR =  (Asset Turnover) x (After Tax Revenue on Sales) x (Assets / Debt) x (Debt / Equity) x (Fraction of Earnings Retained)

Suggest a Term