How to Calculate Percent Growth: Formula & Examples

Percent growth serves as a fundamental concept for understanding how quantities change over time. It provides a standardized way to measure the magnitude of increase or decrease in various contexts, from business performance to economic indicators. Grasping this concept is valuable for anyone seeking to analyze trends, assess financial outcomes, or project future developments.

What is Percent Growth

Percent growth quantifies the relative change between two values, expressing this change as a percentage of the initial value. Unlike absolute change, which simply measures the numerical difference, percent growth normalizes this difference by comparing it to the starting point. This normalization is particularly useful when comparing changes across different scales or types of data. For instance, a $100 increase in a $1,000 investment represents a much larger relative gain than a $100 increase in a $1,000,000 portfolio.

The Percent Growth Formula

The percent growth formula quantifies relative change. The formula is expressed as: ((New Value - Old Value) / Old Value) 100. In this equation, the “New Value” represents the quantity after the change, while the “Old Value” signifies the quantity before the change occurred. The “Old Value” is placed in the denominator to ensure the percentage change is always relative to the original starting point, providing context for the magnitude of the shift. Multiplying by 100 converts the resulting decimal into a percentage, making it easily interpretable.

Calculating Percent Growth with Examples

Applying the percent growth formula involves identifying starting and ending values. Consider a small business that reported annual revenue of $250,000 in the previous fiscal year and $300,000 in the current year. To calculate the revenue growth, subtract the old value from the new value ($300,000 – $250,000 = $50,000). Then, divide this difference by the old value ($50,000 / $250,000 = 0.20). This yields 20% revenue growth.

Another example involves an investment portfolio. If an investment was valued at $10,000 at the beginning of the year and $9,500 at year-end, the calculation reveals a decline. The difference is -$500 ($9,500 – $10,000). Dividing by the old value ($10,000) results in -0.05. This shows -5% growth, indicating a decrease.

Finally, consider a company’s operating expenses. If expenses were $120,000 in one period and increased to $126,000 in the subsequent period, the change is $6,000 ($126,000 – $120,000). Dividing this by the original expenses ($120,000) yields 0.05. Therefore, the operating expenses experienced a 5% growth.

Interpreting Percent Growth Results

Interpreting percent growth involves recognizing what the number signifies. A positive percentage indicates an increase or growth in the measured quantity over the period. For example, a 15% revenue growth suggests the company generated 15% more income compared to the previous period. Conversely, a negative percentage signifies a decrease or decline. A -7% change in inventory levels means that the stock of goods has reduced by 7%. A zero percent growth indicates no change at all between the two values, signifying stability or stagnation.