When researching potential investments, one financial metric to consider is the percentage change in the company's profits. A growing company should display an increase in profits, while a company that is struggling may show declining profits. This single metric is not the only indicator of the value of an investment, but can help you ask better questions such as what is driving the company's growth and will it continue to do so, or why did the company's profits decline and how likely is the company to be able to reverse the negative trend.
Step 1
Subtract the prior accounting period's profit from the current accounting period's profit. The result gives you the numerical change in profit. For example, if last quarter's profits were $76,000 and this quarter's profits equal only $72,000, subtract $76,000 from $72,000 to get -$4,000, or a decrease of $4,000.
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Step 2
Divide the numerical change in profit by the prior accounting period's profit to find the rate of change. In this example, divide the decrease of $4,000 by the prior accounting period's profit of $72,000 to get a decreasing rate of 0.055556 per year.
Step 3
Multiply the rate by 100 to find the percentage change in the profit from one accounting period to the next. In this example, multiply 0.055556 by 100 to get a change of about 5.56 percent.
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