What is a sales growth formula

Growth rate

Here we explain in an easy-to-understand way what the Growth rate is and how you mean easierFormulas calculate the growth rate and the growth factor.

You will learn all this even easier with ours Learning video. Here the topic is graphically prepared using an example and explained step by step.

Growth rate simply explained

By definition, a growth rate describes the relative increase in a variable within a certain period of time. It therefore considers the change in the current period related to the value of the previous period. If several periods are to be considered, an average relative increase in size per time span, i.e. the average growth rate determine.

CAGR

A special form is that CARG (C.ompound A.nnual Growth R.ate). Translated into German, this means something like "compound,annual growth rate“As the name suggests, this is the average percentage change per year. Above all, it plays an important role in business and economics for the consideration of market developments, sales and investments.

Calculate the growth rate

The calculation of the growth rate is generally very simple. In order to measure the increase or decrease of a quantity over a certain period of time, you need two numbers: a start and an end value.
You take the difference between the two values ​​and put it in relation to the starting value. The difference is divided by the starting value to get the relative change to obtain.
There is also the Growth factor. It describes the factor with which one
must multiply the previous value (start value) in order to reach the later value (end value).

Formula growth rate

Do you summarize the above in a mathematical way formula together, it looks like this:

or

is defined here as the relative change in a value compared to its predecessor .

The already mentioned average resp.medium growth rate You can calculate over several periods as follows:

or

She thus provides that geometric means Is it the variable by years, as already said, one speaks of the CARG.

To get the growth factor of both formulas, leave that at the end of the formula:

Growth factor:

medium growth factor:

or

Germany GDP growth rate

In the following example you calculate Germany's GDP growth rate and that of the People's Republic of China using the CARG. Then you determine the growth factor and compare the growth of the Gross domestic products .

You look at a period of ten years from 2007 to 2017:

Germany GDP 2007: 3.440 trillion USD

Germany GDP 2017: 3.667 trillion USD

You use the mean growth rate to calculate. As it is with However, when it comes to years, one speaks of the CARG. Plug the values ​​into the first formula.

Germany's GDP has grown by less than one percent annually over a period of 10 years.

To calculate the growth factor, you can simply add the CARG to 1:

The result can easily be checked by calculating backwards:

People's Republic of China GDP growth rate

For comparison, the same is calculated for the People's Republic of China.

People's Republic of China GDP 2007: $ 3.552 trillion

People's Republic of China GDP 2017: $ 12.240 trillion

The CARG is also calculated here, but this time you use the second formula:

The GDP of the People's Republic of China thus had a significantly higher growth rate averaging around 13% annually over the past 10 years.

The growth factor is 1.1317. This can also be checked again:

gross domestic product

You can calculate the growth rate of a country by comparing the gross domestic product of two different years. The GDP indicates the economic performance of an economy. Check out ours now Contribution to the gross domestic product to learn more about it.