The main goal of the economy is to satisfy human needs. But since they are practically unlimited, unlike the economy, as they move along the time interval when they are satisfied, the economy grows along with this. In order to be able to mathematically calculate, two indicators were introduced - the growth rate and the growth rate. It would seem that two almost identical indicators, but there is a significant difference between them.
What do they mean when they say "growth rate"?
When one speaks of a growth rate indicator, it is understood by what amount of interest the indicator was increased or decreased compared to the base or previous period. So, if the initial value was 100 units of production, and now 110 are being manufactured, then the growth rate is 10%. But it may be such that a negative value is obtained as a result. In this case, we can talk about the rate of decrease of the analyzed indicator, and not about growth. So, if the initial value was in the form of 100 units of production, and when counting only 90, then the reduction level is 10%.
But what equation is needed to calculate the growth rate? The formula is as follows: absolute growth is divided by the level of the previous period and multiplied by one hundred percent. There are separate nuances of counting, which vary depending on the object of counting. There is a calculation for equity, average annual. How to find out their growth rate? Formula and features will be further.
Equity
How to calculate the growth rate of equity? People tend to invest in various enterprises, organizations and institutions in order to generate income. But in such cases, it is necessary to clearly understand what level of profitability currently exists in assets. The higher the capital growth rate, the more profitable the assets. But along with this, they are usually more risky. It should be noted that there are two types of calculation of the growth rate of equity, which one to choose depends on the purpose of the calculation. So, if they consider, in order to find out the profitability from the very beginning, then they use the basic type. If you need to calculate for all periods - chain. The rate of capital growth is considered for two such schemes:
- Under the basic growth rate understand the relationship between the absolute basic growth and the value that was accepted as the initial. So, if you need to calculate the growth rate, for example, from the two thousandth year, then this type is best suited.
- Under the chain pace understand the relationship between the absolute chain growth and the previous value of the linear series by which the comparison is made. This type is used when comparing the capital of the past and the year before last.
How to calculate the average annual rate?
This part of the article will be interesting to those who work with enterprises. The average annual growth rate is calculated based on linear data for a certain period (days, months). There are several steps to take:
- Using the geometric mean formula, calculate the average annual growth rate (add all periods and divide by their number).
- Based on the growth coefficient, determine the growth rate by multiplying it by one hundred percent.
- To calculate the average annual growth rate, it is necessary to subtract one hundred percent from the value obtained in the second paragraph. This he will be.
Separately, it is worth mentioning the calculation of the geometric mean. There are two ways to calculate it:
- Based on the absolute indicators of the series of dynamics, which in general terms look like this: (number of levels) the root of (final indicator / initial value).
- Based on annual growth factors having the following formula: (number of coefficients) the root of (the result of multiplying all growth factors).
Why is it considered?
This indicator is considered to be able to track changes in the efficiency of the enterprise, the effectiveness of the return of capital. This is done by comparing the dynamics of the development of interrelated phenomena over significant time periods, comparing the dynamics of the development of various countries and enterprises in them, as well as the features of the development of states beyond a certain historical framework. Moreover, when it says "state", it is not always meant exactly. It may mean a population of a certain territory or a circle of people of a certain occupation.
An example of its calculation
A practical example based on annual growth factors for 4 years: the coefficient is (four) the root of (1.05 * 1.038 * 1.055 * 1.017) is one whole and four hundredths. The number is multiplied by one hundred percent, subtracted 100, the result is that the average annual growth rate is four percent. The economic report should also indicate that the annual growth rate was in the range from 1.7 percent to 5.5. This is a fairly simple and at the same time understandable example, which gives an idea of calculating growth over a certain time frame.
