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How to Calculate the Nominal Output for Annual Growth Rate

Original post by Mark Kennan of Demand Media

The annual growth rate measures how much a value increases per year as a percentage of the previous amount. For example, a company measures the growth of the number of goods it sells or profits for the year. You can use this growth rate to figure out the numerical amount after the growth rate has been applies. For example, a company selling 100 cars and another selling 1,000 cars might both have 5 percent growth rates, but the nominal output for the second company will increase significantly more because it started with a higher output.

Contents

Step 1

Divide the annual growth rate by 100 to change it to a decimal. For example, if the annual growth rate for cars sold by a company equals 5 percent, divide 5 by 100 to get 0.05.

Step 2

Multiply the annual growth rate expressed as a decimal by the starting amount to find the nominal gain. In this example, if the company sold 400 cars, multiply 400 by 0.05 to get 20, meaning that the 5 percent annual growth rate yields a gain of 20 cars sold.

Step 3

Add the nominal gain to the original amount to find the new nominal output after accounting for the annual growth. In this example, add 20 to 400 to find that the company's car sales increase from 400 to 420 with a 5 percent growth rate.


                   

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About the Author

Mark Kennan is a freelance writer specializing in finance-related articles. He has worked as a sports editor for "Ring-Tum Phi" and published articles on a number of online outlets. Kennan holds a Bachelor of Arts in history and politics from Washington and Lee University.


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