Growth rate

A growth rate is the percentage rate at which a variable is increasing. The rate is measured as a percentage of a baseline period. For example, a company's sales have grown from $1,000,000 in the past year to $1,100,000 in the current year. This is a 10% growth rate. The growth rate is measured for a number of items on a regular basis, such as:

  • The growth rate of the economy as a whole

  • The growth rate of an industry

  • The growth rate of a company's sales

  • The growth rate of a company's profits

  • The growth rate of a company's dividends

A growth rate is used to measure the health of an economy, industry, or individual firm. It can also be used to extrapolate a growth rate forward into the future. However, growth rates are subject to many variables, so attempting a forward extrapolation of an existing growth rate may yield an incorrect figure.

Related Courses

Business Ratios Guidebook 
Financial Analysis 
The Interpretation of Financial Statements