Sustainable Growth Model And Its Application Analysis

It is a common economic principle that business man will always pursue the maximum interests. Managers always hope to extend their business so as to achieve the maximum property, which is also their financial aim. Every businessman takes the maximum growth as the final goal. Consequently, managers will, in drawing the long-term plan or managing the daily producing, spare no effort in occupying markets, expanding producing scale and promoting the maximum growth of sale. However, extra-fast growth will affect business just like what the slow growth does. Many cases proved that blind expansion led an enterprise to a bankruptcy.Extra-fast growth of production and sale will lead the finance into a dilemma. That is to say, when the financing capability of an enterprise reaches its end, it will impede the growth, the blind extra-fast expansion of business will unnecessarily ask for more and more capital. What is more, the enterprise will go to Waterloo if it does not rearrange its financial resources and stop its blind expansion. Therefore, during their drawing the growth plans, companies have to take full consideration of their financial capability and balance the growth of sale and financing, thus to ensure a sound development of its business.Sustainable growth rate (SGR) is the one ensuring a stable growth of the business. It can also be defined as "the highest growth rate of sale provided that the financial resources have not been exhausted." Only when the real growth rate conforms to its SGR, could a company make full and reasonable use of its financial resources. Then, what are the factors deciding SGR? What measures can a company take when these two rates are different? That is what this thesis want to analyze and research.Based on a detailed analysis of the SGR Model and an improvement of the Dupont Model, this paper establishes a SGR analysis system, whosecharts embody the cash flow statement, the statement of assets losses and gains and the balance sheet, so as to illustrate the relationship between SGR and its various variables in a clear-cut way. All those analyses are further supported by the real financial data of 30 listed companies. By comparing the SGR and the real growth rate of those 30 companies, this author tries his best to find out how a company adjusts its SGR to achieve its balanced growth. After that, he analyzes the financial policies and management strategies that a company applies to realize the consistent rate of its sustainable growth and the real growth. Last but not the least, this paper discusses the sustainable growth of Chinese industries briefly on the basis of SGR Model.