External Growth Rate (EGR)
External growth rate describes growth that exceeds a company's internally financed capacity and therefore requires debt, equity, or another outside funding source.
Corporate growth and value-creation metrics connect retained earnings, external financing, shareholder returns, pricing, and allowed returns.
Value creation and growth are related but not interchangeable. A company can grow revenue while consuming cash, finance expansion without earning an adequate return, or report accounting profit while shareholders earn less than their required return.
This section connects three questions. Internal Growth Rate (IGR) asks how fast a company can grow using retained earnings and no new external financing. Sustainable Growth Rate (SGR) allows debt to grow with equity while the company avoids issuing new common shares. External Growth Rate (EGR) is best treated as a planning label for growth that creates an outside financing need rather than as a standardized ratio.
Financing capacity is only one side of the decision. Wealth Added Index (WAI) compares shareholder return with the required cost of equity. The pricing pages address a different use of return: Rate-of-Return Pricing builds a target return into prices, while Rate-of-Return Regulation concerns an allowed return in a regulated setting.
Start with the growth target, then identify the operating assets and working capital required to support it. Compare the target with IGR and SGR, calculate any external financing need in dollars, and test the resulting leverage, liquidity, and ownership effects. Finally, compare expected returns with the relevant cost of capital rather than treating growth itself as value creation.
Use the broader Corporate Cash Flow section when the decision depends more on cash conversion, working capital, operating cost, or free cash flow than on the growth-rate labels themselves.
Corporate-finance models are educational simplifications. Material financing, valuation, accounting, regulatory, or investment decisions require current company data, consistent assumptions, and appropriate professional review.
Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.
External growth rate describes growth that exceeds a company's internally financed capacity and therefore requires debt, equity, or another outside funding source.
Internal growth rate estimates the maximum sales and asset growth a company can support with retained earnings and no new external financing.
Rate-of-return pricing sets a target price by adding the profit needed for a specified return on invested capital to forecast product costs.
Sustainable growth rate estimates how fast a company can grow without issuing new common equity while maintaining its profitability, payout, and leverage policies.
Wealth Added Index estimates shareholder wealth created or destroyed after actual shareholder return is compared with the required cost of equity.