What is profit growth and how is it calculated?

Profit growth is the percentage increase in net earnings (profit) between two time periods. It is calculated by finding the difference between current period profit and prior period profit, dividing by the prior period profit, and multiplying by 100. This metric indicates a company's financial health.

Formula

Profit Growth % = ((Current Profit − Previous Profit) ÷ Previous Profit) × 100

Worked Example

Profit increased from $100,000 last year to $125,000 this year:

1. Increase: $125,000 − $100,000 = $25,000
2. Baseline Ratio: $25,000 ÷ $100,000 = 0.25
3. Rate: 0.25 × 100 = 25%

Result: Profit grew by 25%.