Expense Growth Rate: What it Is & How to Calculate | Jirav

What is Expense Growth %?

Expense Growth % is a measure of the rate at which a company's expenses are increasing or decreasing over a period of time. It’s a crucial metric for companies to monitor, as it can provide valuable insights into the overall health and financial performance of the business.

Why Expense Growth % Is Important

Tracking Expense Growth % plays an important role in several areas:

• Identify cost trends: By tracking changes in Expense Growth % over time, companies can identify patterns and trends in their expenses. This can help them to make informed decisions about where to allocate resources and where to cut costs.
• Evaluate financial performance: Expense Growth % is a key indicator of a company's financial health. A high Expense Growth % can indicate that a company is experiencing financial difficulties, while a low Expense Growth % can suggest that the company is managing its costs effectively.
• Plan for the future: By forecasting future expenses based on past trends, companies can plan ahead and make informed decisions about future investments and budget allocations.

How to Calculate Expense Growth %

Expense Growth % is calculated by comparing a company's expenses over a certain period of time (e.g. quarter, year) to the expenses over a previous period. The formula for calculating Expense Growth % is:

Expense Growth % = (Current Expenses - Previous Expenses) / Previous Expenses x 100

For example, if a company had expenses of $100,000 in Q1 of the previous year and $120,000 in Q1 of the current year, the Expense Growth % would be:

(120,000 - 100,000) / 100,000 x 100 = 20%

In this example, the company's expenses increased by 20% from the previous year's Q1.