Understanding Percent Change
Percent change is a mathematical concept used to describe the extent of a change in a value over time, or between two different points. It is expressed as a percentage of the original (or reference) value. A positive percent change indicates an increase, while a negative percent change indicates a decrease.
Calculating Percent Change
To calculate percent change, subtract the original value from the new value, divide the result by the original value, and then multiply by 100. The formula is: ((New Value - Original Value) / Original Value) × 100%. It is crucial that the original value is not zero, as division by zero is undefined.
A Practical Example
Imagine a company's sales increased from $500,000 last year to $600,000 this year. To find the percent change, we calculate (($600,000 - $500,000) / $500,000) × 100%. This simplifies to ($100,000 / $500,000) × 100%, which equals 0.2 × 100%, resulting in a 20% increase in sales.
Importance and Applications
Percent change is a widely used metric across various disciplines, including finance, economics, statistics, and science. It provides a standardized way to compare changes, regardless of the magnitude of the original values, making it invaluable for analyzing trends, evaluating performance, and making informed decisions.