When we talk about the study of characteristics of large populations, we find that different statistical principles must be applied in order to analyze a small characteristic separately.
In addition, it must be taken into account that there are not a few formulas that are used in this aspect to evaluate an aspect of the population, but that there is a wide range that we must take into account.
Another important aspect is the way in which we will carry out these calculations of large populations, since doing all this manual process can take a significant amount of time that, in previous decades, could be problematic.
How to calculate annual growth rate in EXCEL? – Effective solution
Today, we have different office software capable of carrying out this entire process without the need for us to know the calculations in depth or to depend on paper and pencil, making use of software such as Microsoft Excel.
Microsoft Excel is part of the office suite offered by the Microsoft company which allows us to carry out our accounts in an interface called spreadsheets made up of rows and columns in which we can perform operations such as subtraction with pre-established formulas, and many other kinds of formulas.
One of them, and quite important, is the annual growth rate , which is used by many economists to monitor the growth of a country, company or venture and here we explain how to do it.
Index( )
- What is the use of knowing the annual growth rate?
- Average annual growth rate
- Compound annual growth rate
- What functions allow me to know the annual growth rate in Excel?
- What is the correct way to interpret annual growth rate data?
What is the use of knowing the annual growth rate?
To understand the importance of this calculation we have to start with its definition, which has been known as the positive change in percentage of a variable between two moments in time .
This simply means that the evolution of the value of an aspect is measured, such as the number of children born, which elapses during a certain time and that we can import or export in graphs .
This is important because, as mentioned before, it’s used in various aspects of the economy, whether it’s to see how the trend curve develops in gross domestic product, infant births, mortality, and other sectors that probably won’t Did you know that they depend on this important formula.
For the application of these we must take into account 2 types of formulas with which we can work. They are the following:
Average annual growth rate
Said formula consists of the percentage that expresses the change that a variable has undergone between two dates that can vary.
Compound annual growth rate
This formula defines the cumulative average variation in percentage for a sub-period of time that is between two dates. The preferential use of one or the other formula will depend entirely on the amount of time that you want to visualize.
For long-term studies it will be preferable to use the compound annual growth rate, while for shorter periods it is better to use the average growth rate.
What functions allow me to know the annual growth rate in Excel?
As stated at the beginning of this article, calculating these growth rates means handling an incredible amount of data that must be organized, cleaned, processed, and displayed in an orderly manner. So if they are duplicates, they must be eliminated, Excel being necessary for said work.
Excel within its formulas allows us to calculate the compound annual growth rate using the IRR function where it will only be necessary to place the table to be analyzed in the first argument, the start date in the second argument and the closing date in the last one.
For its part, to calculate the average growth rate it will be necessary to apply manual methods, for this we will only have to have the table to which we want to make the calculation, add a third column where we will place the following formula in the second cell: = (C4-C3) / C3.
Following this, we’ll drag the calculation across the table and then average all the data generated with the AVERAGE function, which would give the end of the calculation. For more information consult Microsoft support .
What is the correct way to interpret annual growth rate data?
Once the result of the calculation of these rates is obtained, the important question is: How is its interpretation carried out? The answer is that it is not possible to make a precise analysis with only 1 result, since it will be necessary to have a history of growth or at least the rate of the previous period, with which it will be possible to make the comparison and obtain if there was a more or less growth.