Answer to Question #236489 in Financial Math for Peter

Question

The revenues of a company increased by 31% in one year and decreased by 27% in year two. What is the overall change over the two-year period?

Answer 1

Lets assume the Revenue of the company at time zero is 100

Then, its revenue at the end of Year 1 $= 100\times (1+0.31) =131$

Then, its revenue at the end of Year 2 $= 131\times(1-0.27) =131\times 0.73 = 95.63$

The Overall change in revenue over two year period $= 100-95.63 = 4.37\%$ ( decrease in revenue)