Revenue Growth

Revenue growth shows whether a business is selling more over time. It is calculated by subtracting last period's revenue from this period's, then dividing by last period's revenue.

For example, if a company's revenue rises from 8 million last year to 9.2 million this year, its revenue growth is 15%. If revenue falls from 8 million to 7.6 million, growth is −5%.

Revenue growth can come from selling more units, raising prices, launching new products, entering new markets or acquiring other businesses. Understanding the source matters. Growth from price increases may not last if customers switch to competitors, while growth from acquisitions is different from growth generated by the existing business.

Revenue growth should also be considered alongside inflation and profitability. In a year when prices across the economy rise by 5%, revenue growth of 4% may mean the business is actually selling less in real terms. And growth bought with heavy discounts or high marketing costs may not lead to higher profits.