IGR
Internal Growth Rate
Short definition
The internal growth rate is the growth cap that can be funded only with retained earnings and no new debt. It sits below SGR because leverage does not rise.
Detailed explanation
When the debt market is closed or the covenant cap is full, the binding cap is IGR. If ROA is not cash, the same cash illusion as in SGR applies.
If IGR is below the growth target, a dividend cut or an asset sale can raise internal cash; otherwise growth is cut.
Why it matters for the CFO
In a constrained year, “we can grow at SGR” is too optimistic if the debt door is shut.
How it is calculated
IGR ≈ ROA × b (yeni borç yok; b = dağıtılmayan oran)
New D = 0 is the difference from SGR. If ROA is not sustainable cash profit, the cap is paper.
Variables in the formula
- ROA: return on assets
- b: retention ratio
How to read it
IGR is the quantity of the first pecking-order rung. It moves with ROA and the dividend.
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Definitions are educational. They are not investment, credit or tax advice.