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How to Calculate Growth Rate or Percent Change. Divide the result by the time in years to calculate the average annual growth rate. In the example, 0.41 divided by 3.62 produces an average annual growth rate of 0.11 in a continuously growing population. Multiply the growth rate by 100 to convert to a percentage. Calculate the growth rate from year 1 to year 2. Subtract year 1 cash flows from year 2 cash flows and then divide by year 1 cash flows. In this example, the growth rate is calculated by subtracting $100,000 from $200,000 and then dividing by $100,000. The answer is 1 or 100 percent. Calculate the cash flow growth rate from year 2 to year 3.

This calculator determines the rate at which a company has grown its sales.

What is the Sales Growth Rate?

Growth

The Sales Growth Rate of a business is the the rate at which it is growing its sales year over year. The Rule #1 Sales Growth Rate calculator helps you determine this rate of growth. Sales Growth Rate is one of the Big 5 Numbers required to determine whether a company may be a Rule #1 'wonderful business'.

The Sales Growth Rate is:

0%

Use the research tool of your choice, locate historical Sales numbers, going back 10 years if possible. Enter the oldest available number as your 'Initial' Value. Enter the most recent number as your 'Current' value. Then, in the 'Age' box, enter a number of years (for example, if your oldest number is from 10 years ago and your newest is from this year, the total span of time between them is 9 years).

If you're using very large Equity numbers (i.e. $415,000,000) instead of BVPS ratio numbers with decimals in them, drop the zeros off the ends. Just be sure to drop the same number of zeroes off each dollar value you enter.

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On MSN Money, Sales is located at: Financial Results > Statements > 10 Year Summary

Next Steps

If these numbers are in line with Rule #1 requirements, move onto the EPS Growth Rate Calculator to finish determining if this business is right for you.

EPS Growth Rate

This is one of the Big 5 Numbers required to determine if a company is a wonderful business.

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The point of this calculation is to see if the operating cash flow trend is predictable in a business.

What is the Operating Cash Flow Growth Rate?

The Operating Cash Flow Growth Rate (aka Cash Flow From Operations growth rate) is the long term rate of growth of operating cash, the money that is actually coming into the bank from business operations. This can be substantially different than EPS since it is real money (as opposed to earnings which can be somewhat theoretical). Knowing the growth rate helps you determine if the trend of 'operating cash' within a company is good enough to make the business 'wonderful' by Rule #1 standards.

When you begin calculating below, it's important that you are entering the OLDEST information you have, then the NEWEST, and then the number of years between them.

Operating Cash Flow Growth Rate:

0%

Using the research tool of your choice, locate historical Cash Flow Statements going back 10 years (if possible). On MSN Money, Cash Flow Statements are located at Financial Results > Statements > Cash Flow.

For the 'Cash from Operating Activities' value, use the appropriate number from the line 'Cash from Operating Activities'.

Next Steps

If these numbers are in line with Rule #1 requirements, move onto the ROIC to finish determining if this business is right for you.

ROIC Calculator

This calculator determines ROIC; the most important number to tell you if a business is being run well.

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