Percentage Increase Formula and Example

Percentage Increase

Definition

• A percentage increase is a way to express a change in value as a percentage of the original value.
• It represents the amount of increase in value as a fraction of the original value, multiplied by 100.

Formula

• Percentage increase = (Increase in value ÷ Original value) × 100
• Where:
  • Increase in value = New value - Original value
  • Original value = Initial value

Example

• Original value: 100
• New value: 120
• Increase in value: 20
• Percentage increase: (20 ÷ 100) × 100 = 20%

Key Concepts

• A percentage increase can be positive or negative, depending on whether the new value is greater than or less than the original value.
• A percentage increase of 0% indicates no change in value.
• A percentage increase of 100% indicates a doubling of the original value.

Real-World Applications

• Percentage increases are used to:
  • Calculate changes in prices, salaries, or populations.
  • Analyze investment returns or growth rates.
  • Compare changes in different quantities over time.

Percentage Increase

Definition

• A percentage increase is a way to express a change in value as a percentage of the original value.
• It represents the amount of increase in value as a fraction of the original value, multiplied by 100.

Formula

• Percentage increase = (Increase in value ÷ Original value) × 100
• Where:
  • Increase in value = New value - Original value
  • Original value = Initial value

Example

• Original value: 100
• New value: 120
• Increase in value: 20
• Percentage increase: (20 ÷ 100) × 100 = 20%

Key Concepts

• A percentage increase can be positive or negative, depending on whether the new value is greater than or less than the original value.
• A percentage increase of 0% indicates no change in value.
• A percentage increase of 100% indicates a doubling of the original value.

Real-World Applications

• Percentage increases are used to calculate changes in prices, salaries, or populations.
• They are used to analyze investment returns or growth rates.
• They are used to compare changes in different quantities over time.

Financial Analysis of an Income Statement

Vertical Analysis

• Analyzes each line item as a percentage of revenue to identify relationships between items and trends over time.
• Helps identify areas of high expense, evaluate profitability, and compare with industry averages.

Horizontal Analysis

• Analyzes changes in line items over time to identify trends and patterns.
• Helps identify areas of improvement, evaluate effectiveness of management decisions, and identify opportunities for cost reduction.

Ratio Analysis

• Calculates various ratios to evaluate performance, including:
  • Gross Margin Ratio: (Gross Profit / Revenue) x 100 to evaluate profitability.
  • Operating Profit Margin Ratio: (Operating Profit / Revenue) x 100 to evaluate operating efficiency.
  • Return on Equity (ROE): Net Income / Total Shareholders' Equity to evaluate profitability and investment returns.
• Helps evaluate profitability, compare with industry averages, and identify areas for improvement.

Common-Size Analysis

• Presents all items as a percentage of revenue to identify:
  • Profitability and expense structure.
  • Trends over time, such as changes in cost structure.
• Helps identify areas of high expense, evaluate profitability, and compare with industry averages.

Financial Metrics

• Used to evaluate performance and make decisions, including:
  • Earnings Per Share (EPS) to evaluate profitability.
  • Price-Earnings Ratio (P/E Ratio) to evaluate investment opportunities.
  • Dividend Yield to evaluate investment returns.
• Helps evaluate investment opportunities, compare with industry averages, and identify areas for improvement.