Sustainable growth rate of firms in financial distress

1995 ◽  
Vol 19 (2) ◽  
pp. 147-151 ◽  
Author(s):  
Harlan D. Platt ◽  
Marjorie B. Platt ◽  
Guangli Chen
Keyword(s):  
Growth Rate ◽  
Financial Distress ◽  
Sustainable Growth ◽  
Sustainable Growth Rate

scholarly journals Corporate Sustainable Growth Rate: The Potential Impact of COVID-19 on Malaysian Companies

2020 ◽  
pp. 25-38
Author(s):  
Fauzias Mat Nor ◽  
Nur Ainna Ramli ◽  
Ainulashikin Marzuki ◽  
Norfhadzilahwati Rahim
Keyword(s):  
Growth Rate ◽  
Financial Distress ◽  
Retention Rate ◽  
Sustainable Growth ◽  
Estimation Model ◽  
Return On Equity ◽  
Factors Affecting ◽  
Business Context ◽  
Sustainable Growth Rate ◽  
Potential Impact

The COVID-19 pandemic and the economic slowdown have negatively impacted various industries and will cause losses, defaults in debt obligations, and significantly increase the risk of insolvency. An excessive level of debt could lead to unsustainable growth, financial distress, and insolvency. Sustainable growth rate (SGR) may have a significant impact on corporate financial distress. Sustainable growth in a business context is the maximum limit for a company to increase its revenue without depleting its financial resources. Sustainable growth rate depends on the earnings retention rate (R) and the return on equity (SGR = R × ROE). The purpose of this research is to investigate the factors affecting the SGR by segregating the positive and negative profitability of Shariah-compliant companies in Malaysia. Using STATA software, we conducted a static estimation model to analyse data from 181 Shariah-compliant companies in Malaysia collected from 2007 to 2016. The research based on ROE analysis by segregating positive and negative ROE as the potential impact of COVID-19 in Malaysia. For companies of positive ROE, the decrease in the dividend payout and the company’s efficiency, and an increase in profitability will increase the sustainable growth rate. The company with negative ROE shows that the decrease in leverage and an increase in the company’s profitability and the company’s efficiency will result in the increased company’s sustainable growth rate. This research can be a guide for companies to the potential or experimental impact of the COVID-19 pandemic either for the company that gains profit or faces the financial losses. This paper also provides an understanding of the corporate sustainable growth rate facing negative and positive profitability in Malaysia.

scholarly journals The Most Appropriate Sustainable Growth Rate Model For Managers And Researchers

2012 ◽  
Vol 28 (3) ◽  
pp. 481 ◽  
Author(s):  
M. M. Fonseka ◽  
Constantino García Ramos ◽  
Gao-liang Tian
Keyword(s):  
Growth Rate ◽  
Financial Distress ◽  
Sample Selection ◽  
Debt Maturity ◽  
Point Of View ◽  
Sustainable Growth ◽  
Significant Difference ◽  
Sustainable Growth Rate ◽  
Financial Characteristics ◽  
Dichotomous Variables

The objectives of this paper are to analyze whether there is a significant difference among widely used Higgins model and Van Horne model and whether these two competing sustainable growth rate models (SGR) estimate divergences in ways that are systematically related to variations in common financial characteristics. We find that Higgins SGR when used as continuous and dichotomous variables is more affected by variations in financial characteristics than Van Hornes model. This study confirms that Higgins and Van Hornes models are qualitatively and approximately the same in relation to most common financial characteristics of a firm. However, if the Higgins model is used to compute SGR, it would give higher SGR for more profitable firms than Van Hornes. A firm with higher leverage is given higher SGR in Van Hornes than Higgins. Variations of liquidity, debt maturity and financial distress are trivial in economic sense. Finally, we find that the both Higgins and Van Hornes models result in approximately same (less than 4%) loss in sample size and not induce more sample-selection bias. We suggest that Higgins and Van Hornes models are equally preferable from both the managers and researchers point of view.

Анализа одрживе стопе раста нефинансијских компанија које котирају на Бањалучкој берзи // A Sustainable Growth Rate Analysis of Non-Financial Companies Listed on the Banja Luka Stock Exchange

2018 ◽  
Vol 14 (24) ◽  
pp. 53
Author(s):  
Горан Радивојац ◽  
George Kester
Keyword(s):  
Growth Rate ◽  
Growth Rates ◽  
Asset Management ◽  
Financial Distress ◽  
Stock Exchange ◽  
Sustainable Growth ◽  
Financial Leverage ◽  
Rate Analysis ◽  
Sustainable Growth Rate ◽  
Banja Luka

Резиме: У свом истраживачком пројекту чије резултате објављујемо у овом чланку, прикупили смо одговарајуће податке, извршили њихову анализу и процијенили одрживост стопе раста нефинансијских компанија које котирају на службеном тржишту акција Бањалучке берзе. Одрживост раста сваке компаније можемо анализирати на неколико начина, али најједноставнији приступ подразумијева анализу максималне брзине раста прихода од продаје у контексту међусловљености и утицаја на профитабилност компаније, политику дивиденди, управљање имовином и финансијски левериџ. Приходи од продаје било које компаније не могу да расту по стопи већој од „одрживе” стопе раста, изузев ако је у кратком року раст подстакнут позитивним утицајем једног или више поменутих параметара повећања перформанси, или је раст стимулисан прибављањем додатног капитала. Summary: In this research project and paper, we propose to assess the sustainable growth rates of non-financial companies listed on the Banja Luka Stock Exchange. A company’s sustainable growth rate is the maximum rate its sales can grow, given the company’s profitability, earnings retention, asset management, and financial leverage. A company’s sales cannot grow at a rate higher than its sustainable growth rate unless one or more of these levers of performance increases or the company issues additional equity. Companies that grow at rates higher than their sustainable growth rates and finance the their asset growth with debt financing experience higher financial leverage that can lead to financial distress and ultimately bankruptcy.

The effect of intangible assets on sustainable growth and firm value – Evidence on intellectual capital investment in companies listed on Bucharest Stock Exchange

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Catalin Ionita ◽  
Elena Dinu
Keyword(s):  
Growth Rate ◽  
Intellectual Capital ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Listed Companies ◽  
Sustainable Growth ◽  
Content Type ◽  
Sustainable Growth Rate ◽  
The Impact

PurposeThe present study investigates the connection between company investments in intellectual capital (IC) and how they translate into financial value. The aim is to test the impact of intangible assets on the firm value and its sustainable growth.Design/methodology/approachThe research employs computation models to determine the sustainable growth rate (SGR) and the firm value (FV), and by using the ordinary least squares (OLS) model through a linear regression assesses the relationship between the dependent variables and expenditures on intangibles like R&D, IT programs and patents. A sample of 42 companies has been selected out of the 78 listed at Bucharest Stock Exchange (BSE), based on the appropriateness of the information disclosed in the financial reports for the period 2016–2019.FindingsThe results show that intangibles classified as innovative competences (R&D and Patents) do not have a positive impact on SGR and FV in listed companies from Romania. Moreover, R&D has a negative and significant effect on FV, while IT Programs have a positive and significant impact on FV, but not on the SGR. Variables categorised as economic competencies (Brands, Shares held in associates and jointly controlled entities) and firm structure-specific variables (Leverage, Firm Performance) seem to have a significant effect on SGR and FV. Shares held in associates and jointly controlled entities is the variable that can have the biggest impact when it comes to FV for companies listed at BSE.Research limitations/implicationsDue to non-disclosure of specific information by some companies, or lack of investments in intangibles the sample had to be reduced and does not cover all listed companies.Practical implicationsCompanies listed on the Regulated Market from the Bucharest Stock Exchange should maintain their scale of liabilities at a reasonable level when financing intangible assets in order to ensure corporate long-term and sustainable development. Also, these companies should maintain awareness about the importance of intangible assets and invest more in specific sub-components, in order to sustain competitive advantage. Recognizing the roles of intangibles, managers need to develop strategies to invest in profitable intangibles by reasonably allocating their limited resources, in order to achieve sustainable growth and increase company success.Originality/valueStudies concerning the relation between investments in intangibles and sustainable growth rate and firm value of listed Romanian companies are very scarce. This paper reveals new research, never before undertaken, concerning expenditures on intangibles by Romanian companies and the valuation of such investments on Bucharest Stock Exchange.

scholarly journals Conservative Working Capital Policy: Can it Increase Profitability and Sustainable Growth Rate?

2021 ◽  
Vol 12 (3) ◽  
pp. 5630-5637
Author(s):  
Sunardi Sunardi Et. al.
Keyword(s):  
Growth Rate ◽  
Manufacturing Sector ◽  
Sustainable Growth ◽  
Working Capital ◽  
Financing Policy ◽  
Panel Data Regression ◽  
Data Regression ◽  
Sustainable Growth Rate ◽  
Investment And Financing ◽  
Positive Effect

The objective of this study is to investigate the effect of conservative working capital policy on profitability and examine the effect of conservative working capital policy on sustainable growth mediated by profitability in the manufacturing sector in Indonesia. This study involves 133 manufacturing firms in Indonesia during the 2013-2018 period. Data are analyzed using panel data regression with random effects estimation models. The result of this study showed that conservative working capital policy, both investment and financing policy, has proven to have a positive effect on sustainable growth rate. Besides, this study also proved that profitability has a positive effect on SGR. Furthermore, there was the effect of conservative working capital policies on the level of sustainable growth through profitability. This study not only contributes to expanding knowledge about the relationship between working capital policies, profitability and sustainable growth rates, but also has relevant implications for firm managers to improve firm performance to be able to grow sustainably

The Anatomy of Sustainable Growth Rate of Indian Manufacturing Firms

2018 ◽  
Vol 19 (4) ◽  
pp. 1050-1071 ◽  
Author(s):  
Lalit Arora ◽  
Shailendra Kumar ◽  
Piyush Verma
Keyword(s):  
Growth Rate ◽  
Manufacturing Sector ◽  
Sustainable Growth ◽  
Profit Margin ◽  
Regression Equations ◽  
Industrial Growth ◽  
Return On Equity ◽  
Net Profit ◽  
Sustainable Growth Rate ◽  
Indian Manufacturing Sector

An important parameter to gauge the reasons behind success (failure) of a firm in the form of sustainable growth rate provides useful insights to managers and investors. This research analyzes the variations in calculations and suitability of method of calculating this growth rate using two different formulas. It also intends to examine the extent to which these variations in sustainable growth rate are explained by some of its important determinants. Using panel data regression by decomposing return on equity into net profit margin, asset turnover and financial leverage, results suggest that four key ratios are robust in capturing the variations in sustainable growth rate even after introducing industry-specific factors like industrial growth and inflation in the regression equations. Sustainable growth rate calculated only on the basis of percentage change in book value of equity provides an aggregate view depicting that any changes in sustainable growth rate across industries are random. Further analysis provides evidence that net profit margin drives the sustainable growth of firms in the Indian manufacturing sector.

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