Info 1: equities growth rate definition
Info 2: calculation for equities growth rate
Info 3: Average Equities growth rate vs compound equities growth rate
Info 4: Notes for equity growth rate
Opening information:
Equities growth rate breaks into two words equities and growth rate. Equities mean owners’ money and growth rate means increased percentage. Equities growth rate means
So now let’s have a look at what is mean to equities growth rate, the calculation for the equities growth rate, and what is the difference between the average Equities growth rate and compound equities growth rate, finally one small note for the equity growth rate.
Info 1: equities growth rate definition
When comes to public Corporations equities is a leftover owners’ money that is held by any business after paying all liabilities using the whole assets of the business.
Based on the equities value each investor makes most of the important decisions to buy certain company shares or not.
The business value is equities, which means if the business had no equities the business’s worth is zero it doesn’t matter how much it’s making on the net income.
Therefore each year the equities increase whenever businesses grow or reinvest their profits into the company because when public Corporations reinvest their profits their assets grow.
When the assets grow, after the subtraction of the liabilities the leftover money would also increase. which increases the money from the last year to the current year showing the raising of the equities or leftover money.
Without such an increase in the equities, there is no value raised for the company, the Industry level remains the same.
So however to realize the real value of the Corporation in the equities increasing percentages and to find the growth of the equities over time at any period.
Let’s calculation take place on different methods but with the core purpose of finding growth. Therefore let’s dive into how the equities calculation takes place.
Info 2: calculation for equities growth rate
Equities growth doesn’t take place the any specific fixed growth rate or amount, instead, it’s a multiple amount of method to identify the growth rate of increase over time from the equities in the past year to the current year. To understand well take a calculator.
If the equity of the business is 12 million dollars before the 10 years and now the current year equity is 78 million dollars subtracting the 78 million dollars with 12 million dollars shows that 66 million dollars increase over the last 10 years.
To find the whole percentage of growth divide the 66 million by 12 million states that 5.5 answers.
In decimal 0.01 is 1 percent, so 5.5 is 550 percent in the equity from the last 10 years to now. To verify If you plus the 12 with 550% you got the answer of 78.
On the other hand, if the same Investors need to know the average equity growth rate of the last 10 years for 12 million and 78 million, we already by subtracting the 78 million with 12 million growth shows the 66 million dollars over the past decade.
However, finding the average growth rate divided the 66 million by 10 years demonstrates that equities had increased by 6.6 million each year over the last 10 years.
To find and convert such 6.6 million into percentages divide the 6.6 million by 12 million dollars eliminating the 0.55 answer. In percentage 0.55 is 55 percent. Each year equity had grown 55 percent for the last 10 years.
But don’t confuse the average equity growth rate and compound average growth rate for equities are not the same things. Let’s jump to know the key difference and another method of finding a compound equities growth.
Info 3: Average Equities growth rate vs compound equities growth rate
At the same time, if the Investor needs to the compound equities growth rate indeed of the average growth of equities. It doesn’t illustrate the same method.
Moreover to find the compound equity growth we already know that 66 million dollars is the total increase in equities over the past 10 years.
To understand and conclude the compound growth rate for nearly 10 years the Investor needs to know how to find the value for any power of roots in math.
This might be a little confusing let’s clarify, the square root of 16 is 4. Say 2√16 = 4 × 4. It shows over the last 2 years compound average growth rate is 4 percent.
But what if 66 million for 10 years in root, leaves the initial year because it’s starting year and finds only for 9 grown years? say 9√66 million. need to know what number brings the 66 million by multiplying the same number 9 times.
It shows that 21 brings 66 million in roots maths, so the compound average equity growth rate of 10 years is 21 percent. Clearly to verify take a calculator and the 21 percent 9 times consistently with 12 million dollars, it’s end with 66 Million dollars.
If you still doubt the compound average equity growth rate (CAEGR), search on the rule investing website for specifically CAEGR full content about full method deep demonstration.
Info 4: Notes for equity growth rate
Listen Equity growth rate would be calculated by different amounts of method with different purposes.
It’s choose the method that helps to overview any business value.
So each of these methods of calculating growth rate shows a different and distinct view of the business’s past and future growth.