Enter the initial margin, final margin, and revenue growth into the calculator to determine the margin growth. This calculator helps in understanding how the profit margin of a business has grown over time relative to revenue growth.
Margin Growth Formula
The following formula is used to calculate the margin growth.
text{MG} = left( frac{text{FM} - text{IM}}{text{IM}} right) times 100
Variables:
- MG is the margin growth (%)
- FM is the final margin (%)
- IM is the initial margin (%)
To calculate the margin growth, subtract the initial margin from the final margin, divide by the initial margin, and then multiply by 100 to get the percentage.
What is Margin Growth?
Margin growth is a measure of how much a company’s profit margin has increased over a period of time. It is an indicator of improving profitability and efficiency in converting revenue into actual profit. A positive margin growth suggests that the company is becoming more profitable, while a negative margin growth indicates a decline in profitability.
How to Calculate Margin Growth?
The following steps outline how to calculate the Margin Growth.
- First, determine the initial margin (IM) as a percentage.
- Next, determine the final margin (FM) as a percentage.
- Next, gather the formula from above = MG = ((FM – IM) / IM) * 100.
- Finally, calculate the Margin Growth (MG) as a percentage.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Initial Margin (IM) = 15%
Final Margin (FM) = 20%
Revenue Growth = 10% (Note: Revenue Growth is not used in the calculation of Margin Growth, but it can be useful for comparative analysis.)
