Calculating for business growth rate is necessary if you are an investor. By doing this, you will be able to track if you invested your money in a good business. The growth rate will tell you how much you have earned by owning a share in the company. This growth rate is presented as a percentage. In order for you to calculate the business growth rate of the company that you are investing in, there are several facts that you have to collect first.
Here are the steps on how you can calculate a business growth rate:
- Information. There are some things that you have to get before you can start calculating for the growth rate of a business. Companies send annual or quarterly reports on the statistics of their growth. This is sent to all the shareholders in the company. This report will show how much the company has earned or wasted in the last couple of month or in the last year. What you have to do is get that information so that you can start calculating for the growth rate. You may even see this information on the official website of the company that you are investing in.
- Formula. The formula for calculating for the growth rate of the company is: growth rate of the present year less the growth rate for the previous year divided by the growth rate of the previous year. The answer that you will get for this is going to be the business growth rate of the company. For the next year, you can calculate it by substituting the values of the previous year and the present year. This will show the growth increase of the business.
- Negative or Positive. The values of the growth rate are relative rates. In some cases, you will be able to get a negative value when you compute for the growth rate. This means that the percentage rates of the company have dropped, and you may not be able to get a profit from the shares that you own on the company. The company may recover the next reporting year, and once again give you a positive growth rate. For each growth year, the rate of businesses can fluctuate. This is why it is important for you to know how to compute for the business growth rate of the company that you are investing in.
If you are planning to invest in a company, it will be useful if you first do research on their growth rates so that you know that you are going to put your money in a safe place. It is better to invest in companies that have stable growth rates rather than investing in a business that has a high fluctuation in growth rates. If you want to speed up the process of computing the growth rate, you can make use of business growth rate calculators online for free. All you will have to do is to enter the values for the growth rates of some years, and the calculator will be the one to compute the results.