It is a Trend Analysis tool that shows how fast a company is growing (positive growth) or shrinking (negative growth). You compare the current year Revenue account with the previous year. If you need to know only one number of your company, this is the one. This figure is very helpful for investors too, as the Revenue Growth Rate is going to help them evaluate the business current and potential growth.
Revenue Growth Rate is a simple tool that helps investors and owners identifying trends in the company. If Current Year Revenue is smaller than Previous Year Revenue, then the company has shrunk, and the Growth Rate would be negative. If you are analyzing your company month to month, you have to select the revenue for that specific month and compare it with the previous month. The same thing if your analysis is quarterly.
Practice yourself with this simplified Apple’s Income Statements (In $Billions):
Calculate Apple’s 2015 Revenue Growth Rate:
= (2015 revenue – 2014 revenue)/(2014 revenue)
= ($234B – $183B)/$183B
= 0.28 *100
Apple’s 2015 revenue grew 28% from 2014
Calculate Apple’s 2017 Revenue Growth Rate:
= (2017 revenue – 2016 Revenue)/ 2016 Revenue
= ($229B – $216B)/$216B
Apple’s 2017 revenue grew 6% from 2016