M. A. Limitovsky. Sustainable Growth and Leverage Effects

V.8, N2, 2010

In the article I review typical mistakes concerning the application of sustainable growth conception and give recommendations how to avoid them. Then I input the effects of operating and investment leverages into the analysis and make some corrections of classical formulas of sustainable growth calculations. The article ends with a practical case illustrating the modified formulas application and differences between the results of the classical and the modified approaches to analysis of sustainable growth.

Keywords: sustainable growth, financial strategy, operating leverage, financial leverage, DuPont decomposition.