Calculating percentage increases and decreases enables a business owner to keep expenditures in line with income. Nothing paints a quicker picture of your financial health than looking at past and present earnings and expenditures, and nothing shows that more clearly than percentages.
Note your starting number. For example, in the first six months of last year, you spent £3,250 on advertising.
Compute the number for that same category in current dollars. This year, your advertising expenditures for that same period are £3,575.
Subtract the old number from the new number. In this case, £3,575 minus £3,250. You had an increase of £325.
Divide the increase ($500) by the original starting number ($5,000). The resulting decimal, .10 or 10 per cent , is the percentage increase from last year to this year. The same formula applies to decreases.
- Use the percentage of increase to evaluate gross margins, cost of goods sold, total revenue and other financial ratios to stay abreast of your company's financial well-being.
- Compare your company's percentages with those of other businesses in your industry to better understand your competition.
- Never forget to move your decimal to the right two places before writing your answer as a percent. In this example, .043 = 4.3%.