Enter the net income from the previous year or quarter.
Enter the net income from the current year or quarter.
Results
Growth Rate:
Absolute Change:
function calculateNetIncomeGrowth() {
// Clear previous results and errors
document.getElementById('nigrResult').style.display = 'none';
document.getElementById('nigrError').style.display = 'none';
document.getElementById('nigrError').innerHTML = ";
// Get input values
var priorIncomeStr = document.getElementById('priorNetIncome').value;
var currentIncomeStr = document.getElementById('currentNetIncome').value;
// Validation
if (priorIncomeStr === " || currentIncomeStr === ") {
document.getElementById('nigrError').innerHTML = 'Please enter values for both income periods.';
document.getElementById('nigrError').style.display = 'block';
return;
}
var priorIncome = parseFloat(priorIncomeStr);
var currentIncome = parseFloat(currentIncomeStr);
if (isNaN(priorIncome) || isNaN(currentIncome)) {
document.getElementById('nigrError').innerHTML = 'Please enter valid numbers.';
document.getElementById('nigrError').style.display = 'block';
return;
}
if (priorIncome === 0) {
document.getElementById('nigrError').innerHTML = 'Prior period income cannot be zero (cannot divide by zero). Growth rate is undefined.';
document.getElementById('nigrError').style.display = 'block';
return;
}
// Calculation Logic
// Formula: ((Current – Prior) / |Prior|) * 100
// We use Math.abs(priorIncome) in the denominator to handle negative starting incomes correctly mathematically for directional growth.
var difference = currentIncome – priorIncome;
var growthRate = (difference / Math.abs(priorIncome)) * 100;
// Formatting results
var growthRateFormatted = growthRate.toFixed(2) + '%';
// Currency formatting
var currencyFormatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
var diffFormatted = currencyFormatter.format(difference);
if (difference > 0) diffFormatted = "+" + diffFormatted;
// Update DOM
document.getElementById('growthRateResult').innerHTML = growthRateFormatted;
document.getElementById('absChangeResult').innerHTML = diffFormatted;
// Interpretation
var interpretation = "";
if (growthRate > 0) {
document.getElementById('growthRateResult').style.color = '#276749'; // Green
interpretation = "Your net income has increased compared to the previous period.";
} else if (growthRate < 0) {
document.getElementById('growthRateResult').style.color = '#c53030'; // Red
interpretation = "Your net income has decreased compared to the previous period.";
} else {
document.getElementById('growthRateResult').style.color = '#333';
interpretation = "There was no change in net income between the two periods.";
}
document.getElementById('interpretationText').innerHTML = interpretation;
// Show result container
document.getElementById('nigrResult').style.display = 'block';
}
How to Calculate Net Income Growth Rate
Understanding the trajectory of your business's profitability is crucial for long-term success. The Net Income Growth Rate is a vital financial metric that measures the percentage increase or decrease in a company's bottom line over a specific period of time. Whether you are analyzing annual reports, preparing for investors, or simply tracking your small business performance, mastering this calculation is essential.
The Net Income Growth Formula
To calculate the growth rate of your net income, you compare the profitability of two distinct periods (usually years or quarters). The mathematical formula is:
Growth Rate = [(Current Period Net Income – Prior Period Net Income) / |Prior Period Net Income|] × 100
Note: The absolute value of the prior period income is used in the denominator to ensure the mathematical direction of growth is correct if the previous period had a loss.
Step-by-Step Calculation Guide
Determine the Time Frame: Decide if you are comparing Month-over-Month (MoM), Quarter-over-Quarter (QoQ), or Year-over-Year (YoY).
Gather Data: Retrieve the Net Income figure from the Income Statement (Profit & Loss) for the starting period and the ending period.
Calculate the Difference: Subtract the prior period's income from the current period's income.
Divide by Prior Period: Divide the result by the absolute value of the prior period's income.
Convert to Percentage: Multiply by 100 to get the percentage.
Real-World Examples
Example 1: Positive Growth
A tech startup earned $100,000 in 2022 and $150,000 in 2023.
A company had a net loss of -$10,000 last year and a net income of $5,000 this year.
Prior Income: -$10,000
Current Income: $5,000
Difference: $5,000 – (-$10,000) = $15,000
Calculation: $15,000 / |-10,000| = 1.5
Result: 150% Growth Rate
Why is Net Income Growth Important?
While revenue growth shows that sales are increasing, net income growth confirms that the company is becoming more profitable. It accounts for the efficiency of operations, cost management, and interest expenses. Investors often prefer companies with consistent net income growth as it signals financial stability and potential for future dividends or reinvestment.
Frequently Asked Questions
Question
Answer
What is a good net income growth rate?
This varies by industry. Mature companies might aim for 5-10%, while high-growth startups often target 20% or more annually.
Can growth rate be over 100%?
Yes, if a company more than doubles its net income from one period to the next, the growth rate will exceed 100%.
What if the prior period income is zero?
If the starting income is exactly zero, the growth rate cannot be calculated mathematically (undefined). You can only report the absolute dollar change.