How to Calculate Percent Growth Year Over Year
Calculating percent growth year over year is a fundamental skill in finance, economics, and business analysis. It helps to understand the rate at which a particular metric, such as revenue, profit, or population, has increased or decreased over a specific period. This article will guide you through the steps to calculate percent growth year over year accurately.
Understanding the Concept
Before diving into the calculation, it is essential to understand the concept of percent growth year over year. It represents the percentage increase or decrease in a value from one year to the next. The formula to calculate percent growth year over year is:
Percent Growth Year Over Year = [(Value in Year 2 – Value in Year 1) / Value in Year 1] 100
Collecting Data
To calculate percent growth year over year, you need to have the data for the two years you are comparing. For instance, if you want to calculate the percent growth of revenue from 2020 to 2021, you will need the revenue figures for both years.
Applying the Formula
Once you have the data, you can apply the formula to calculate the percent growth year over year. Let’s take an example:
Suppose the revenue in 2020 was $100,000, and in 2021, it increased to $120,000.
Percent Growth Year Over Year = [(120,000 – 100,000) / 100,000] 100
Percent Growth Year Over Year = (20,000 / 100,000) 100
Percent Growth Year Over Year = 0.2 100
Percent Growth Year Over Year = 20%
In this example, the percent growth year over year for revenue is 20%, indicating a 20% increase in revenue from 2020 to 2021.
Considerations for Negative Growth
If the value in Year 2 is less than the value in Year 1, the percent growth year over year will be negative, indicating a decrease. For instance, if the revenue in 2020 was $100,000 and in 2021, it decreased to $80,000:
Percent Growth Year Over Year = [(80,000 – 100,000) / 100,000] 100
Percent Growth Year Over Year = (-20,000 / 100,000) 100
Percent Growth Year Over Year = -0.2 100
Percent Growth Year Over Year = -20%
In this case, the percent growth year over year for revenue is -20%, indicating a 20% decrease in revenue from 2020 to 2021.
Conclusion
Calculating percent growth year over year is a straightforward process that provides valuable insights into the performance of a business, economy, or any other metric. By following the steps outlined in this article, you can easily determine the rate of growth or decline and make informed decisions based on the data.
