How to Calculate Percentage Change

Understanding how to calculate percentage change is an important skill, whether you’re a student, a business owner, or someone managing personal finances. Percentage change helps you compare two values and determine the degree of change, whether it’s an increase or decrease. In this guide, we’ll walk you through the process of calculating percentage change, explain its significance, and provide you with practical examples to help you grasp the concept easily.

What is Percentage Change?

Percentage change measures the difference between an old value and a new value as a percentage of the old value. It is commonly used to track the growth or decline of various factors like prices, sales, profits, or even population statistics.

The formula for calculating percentage change is straightforward:

This formula helps you understand how much something has increased or decreased in relation to its original value, expressed as a percentage.

Why is Percentage Change Important?

Percentage change plays a key role in many fields. Here’s why it’s valuable:

Tracking Business Performance: Businesses use percentage change to measure improvements or declines in key metrics such as revenue, profits, or sales.
Financial Analysis: Investors and analysts use percentage change to evaluate the performance of stocks, bonds, and other financial assets over time.
Price Adjustments: Retailers and service providers use percentage change to adjust prices based on market trends, inflation, or supply and demand factors.
Personal Finance: It can help individuals assess changes in expenses, savings, or income over time.

How to Calculate Percentage Change: The Formula

To calculate percentage change, you’ll need two key values: the old value (initial value) and the new value (final value). Here’s the formula:

Let’s break this down with a step-by-step example.

Step-by-Step Guide: How to Calculate Percentage Change

Identify the Old and New Values:
- The Old Value is the initial value or the starting point.
- The New Value is the value after the change has occurred.
Subtract the Old Value from the New Value:
This step tells you the absolute difference between the two values.
Divide the Difference by the Old Value:
This step expresses the difference as a proportion of the old value.
Multiply by 100:
To convert the result into a percentage, multiply the result by 100.

Example 1: How to Calculate Percentage Increase

Let’s say your sales revenue increased from $200,000 to $250,000. You want to calculate the percentage change in revenue.

Old Value = $200,000
New Value = $250,000

Now, apply the formula:

This means that your sales revenue increased by 25%.

Example 2: How to Calculate Percentage Decrease

Now, let’s say your company’s profits decreased from $100,000 to $75,000, and you want to calculate the percentage change in profits.

Old Value = $100,000
New Value = $75,000

Here’s the calculation:

In this case, your profits decreased by 25%.

How to Calculate Percentage Change for Larger Numbers

The process for calculating percentage change remains the same even when you are working with larger numbers. Let’s consider the population of a city increasing from 1,500,000 to 2,000,000.

Old Value = 1,500,000
New Value = 2,000,000

Using the formula:

In this case, the population increased by 33.33%.

How to Calculate Percentage Change Between Two Percentages

If you need to calculate the percentage change between two percentages, the process is the same. For example, if the interest rate increased from 5% to 7%, the calculation would be:

Old Value = 5%
New Value = 7%

Here’s the calculation:

The interest rate increased by 40%.

Tips for Accurate Percentage Change Calculations

Ensure Accuracy: Double-check your numbers to ensure that the old and new values are correctly identified.
Use Absolute Values for Negative Changes: If you’re working with a percentage decrease and don’t want to use negative numbers, you can take the absolute value of the result.
Context Matters: Always interpret percentage changes in the context of the situation. A 5% increase in a small number may be significant, whereas the same percentage change in a large number might not be.

Common Mistakes When Calculating Percentage Change

While calculating percentage change is simple, it’s easy to make a few mistakes. Here are some common ones:

Using Incorrect Values: Always make sure you’re comparing the correct “old” and “new” values. The “old” value is always the starting point, and the “new” value is the point of comparison.
Forgetting to Multiply by 100: It’s essential to multiply the result by 100 to get the percentage change.
Not Recognizing Negative Changes: A negative percentage change indicates a decrease, so ensure you interpret the result correctly.

20 FAQs About How to Calculate Percentage Change

What is the formula for percentage change?
The formula is:
Percentage Change = ((New Value – Old Value) / Old Value) × 100
What does a negative percentage change mean?
A negative percentage change indicates a decrease in value.
Can I use percentage change for prices?
Yes, percentage change is commonly used to track price changes in business, inflation, and retail.
Is the percentage change formula the same for all situations?
Yes, the formula is the same, but the context may change (e.g., sales, population, or profits).
How do I calculate percentage change in population?
Use the same formula with population numbers as the old and new values.
Can I calculate percentage change for non-numeric data?
No, percentage change requires numeric values to compare.
How do I calculate percentage change between two percentages?
Use the same formula, but both values will be percentages.
Is percentage change useful for comparing different time periods?
Yes, it’s great for comparing changes over time, such as sales growth or annual inflation rates.
What’s the difference between percentage change and percentage points?
Percentage change compares the relative difference between two values, while percentage points measure the absolute difference between percentages.
How do I calculate percentage change for monthly data?
Simply use the values for the start and end of the month to calculate the change.
Can percentage change be used for financial analysis?
Yes, financial analysts use percentage change to track revenue, expenses, profits, and more.
What if the old value is zero?
If the old value is zero, percentage change is undefined because dividing by zero is not possible.
Can I use percentage change for performance tracking?
Yes, percentage change is a great way to track performance in various fields like business, education, and sports.
How do I interpret a percentage increase?
A positive result indicates growth, while a negative result indicates a decline.
What if my percentage change is over 100%?
A percentage change over 100% means the new value is more than double the old value.
How can I calculate percentage change in Excel?
Use the formula (new value - old value) / old value * 100 in an Excel cell.
Can percentage change help with budgeting?
Yes, it can help compare expenses or savings changes over time.
How can I apply percentage change in marketing?
Track changes in metrics like conversion rates, sales, or customer acquisition costs.
What does a 50% increase mean?
A 50% increase means the new value is 1.5 times the original value.
How do I calculate percentage change in stock prices?
Use the opening and closing prices as the old and new values, respectively.

Conclusion

Calculating percentage change is a straightforward but powerful skill. It allows you to analyze growth or decline in various areas like business performance, prices, or even personal finances. By understanding how to calculate percentage change, you can make more informed decisions and better understand how values evolve over time. Whether you’re tracking sales, analyzing stock performance, or measuring changes in your personal budget, percentage change provides a clear, quantifiable way to assess changes.