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When you analyze a company's performance, it's often useful to see how much the company's revenue or expenses have increased or decreased since the last month quarter or year. Some company's annual reports include calculations indicating these changes, but if they don't, you can create formulas to calculate that difference quickly and easily, especially if you store your data using an Excel table. So the first step is to input your data into an Excel table. I have one here in my Percentage Change worksheet. I have the values for operating cost, selling, general and administrative, basically operating costs and expenses for fiscal year 2008 and fiscal year 2007.
Once again, my goal is to calculate the percentage change from 2007 to 2008. To do that, you create a formula, where you subtract the previous year's value from the current year value and then divide it by the previous year to calculate the change. So when you put that into operation, you type in =, the present year or the most recent year 2008 is in cell B6, subtract the previous year, C6 and close the parenthesis.
The reason that I have these two values in a parenthesis is because when I put in division and divide by C6, Excel would divide C6 by C6, because division is a higher priority operation than subtraction. So if there were no parenthesis, it will do the division first, dividing C6 by C6, which is 1, it has to be, and subtract the value of 1 from the value in B6. And you would get the wrong answer for your formula. So, by using the parenthesis, I'm able to calculate their percentage change correctly.
So, my formula is in order and I press Enter and there you have the percent change. That is correct in this case, so I don't make any changes. But if you did want to make some changes on how Excel handles formulas that you enter into tables, you can use the AutoCorrect Options. Click here and then you can either undo the current operation or you can have Excel not automatically create calculated columns whenever you enter a formula into a cell at the top of a column. It's useful to compare a year to a previous year, but you should also compare previous quarters or months to the previous quarter.
If you want, you can also perform To A Year Ago Analysis where you compare this January to the previous January. That's particularly useful for companies who have sales that are highly seasonal. Once you've calculated a company's percentage change for income and expenses, you can compare its values to those of other companies based on the values in their annual reports. Revenue growth provides one obvious data point for you to compare, but even negative growth might not be the worst outcome imaginable. During a recession, the company whose sales decrease the least will often be in the best position when the economy recovers.
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