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Credit Engineering for Bankers, 2nd Edition by Johnathan Mun, Morton Glantz

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Chapter 9 Sustainable Growth and Credit Risk Management

Chapter Outline

  • The Sustainable Growth Model 239
    • The Two Conditions for “L”: the Debt/Equity Ratio 243
    • Example Case One 243
    • Example Case Two 245
  • Solving Sustainable Growth Problems 245
    • Issue Equity 246
    • Define the Targeted Growth Period 246
    • Improve the Capital/Output Ratio (Assets/Sales) 246
    • Increase Profit Margins 247
    • Reduce the Dividend Payout Ratio 247
    • Pruning Profits 248
    • A New Strategy: The Solution 249
  • Curve Fitting 250
    • Exponential Growth Regression Curve and the Sustainable Growth Model 250
    • Logarithmic Regression Curve and the Sustainable Growth Model 251

Growth is important to financial health, but it can be too rapid for an obligor’s own good. Too rapid sales expansion ...

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