How to calculate the growth rate and the growth rate

Quite often for the analysis of any of a number of speakers used statistics such as growth rate in percent and the corresponding growth rate. With the first usually clear, but the second often causes different issues related to the interpretation of the obtained values, and the calculation formula. It's time to figure out what is the difference between these values and how they should correctly identify.

Growth

This index is calculated in order to find out what percentage one value is of range from another. The role of the latter often use the previous value or the basic, that is, one that is at the beginning of the analyzed series. If the result is greater than 100%, this means that an increase of the studied index, and Vice versa. To calculate the rate of growth is very simple: it is sufficient to find the ratio of the values during the reporting period to the previous value or the basic time interval.

Growth Rate

Unlike the previous, this indicator allows us to determine not how much, but changes of the studied quantity. A positive value of the calculation results indicates that the observed rate of growth, and negative – the decrease rate of the studied values in the previous reference period. How to calculate growth rate? First find the ratio of the examined indicator to the base or previous, and then from the result subtract unit, and then usually multiplying the result by 100 to get its percentage. This method is used most often, however, it so happens that instead of the actual values of the analyzed index is only known value of the absolute gain. How to calculate the growth rate in this case? Here it is necessary to use an alternative formula. The second variant of calculation is to find the percentage of the absolute growth to the level in comparison with which it was designed.

Practice

Suppose we know that in 2010 joint-stock company "shining Path" made a profit of 120 000 rubles., in 2011 – 110 400 rubles, and in 2012 the income increased compared to 2011 by 25 000 rubles, Let's see how to calculate the growth rate and the growth rate based on available data, and what from this can be concluded.

1. Calculation of indicators for 2011.

Growth Rate = 110 400 / 120 000 = 0,92 or 92%.

Conclusion: In 2011 the company's profit compared to the previous year was 92%.

Growth Rate = 110 400 / 120 000 – 1 = -0,08, or -8%.

This means that in 2011, the revenues of JSC «Light the Way” compared to 2010 decreased by 8%.

2. The calculation of the indicators for the year 2012.

The growth Rate = (120 000 + 25 000) / 120 000 & ≈ ; 1,2083 or 120,83%.

This means that the profit of our company in 2012 in comparison with the previous year 2011 amounted to 120,83%.

Growth Rate = 25 000 / 120 000 – 1 &≈; 0,2083 or from 20.83%.

Conclusion: the financial results of the analyzed enterprises in 2012 was more than the corresponding figure for 2011 by 20.83%.

Conclusion

After we figured out how to calculate the growth rate and the growth rate, note that on the basis of only one indicator it is impossible to give a uniquely correct estimate of the studied phenomenon. For example, it may be that the value of the absolute growth of profit increases, and the development of enterprises is slowing down. Therefore, any signs of dynamics should be analysed together, that is comprehensively.