Annual revenue for Corning Supplies grew by 5 5 in 2007
Annual revenue for Corning Supplies grew by 5.5% in 2007; 1.1% in 2008; −3.5% in 2009; −1.1% in 2010; and 1.8% in 2011. What is the mean growth annual rate over this period?
Annual revenue for Corning Supplies grew by 5 5 in 2007
The Correct Answer and Explanation is :
To find the mean growth rate over the period from 2007 to 2011, we can calculate the average of the annual growth rates provided for each year. Here’s the breakdown:
Given Growth Rates:
- 2007: +5.5%
- 2008: +1.1%
- 2009: -3.5%
- 2010: -1.1%
- 2011: +1.8%
Step 1: Add the Growth Rates
First, sum all the growth rates:
[
5.5 + 1.1 + (-3.5) + (-1.1) + 1.8 = 3.8
]
Step 2: Calculate the Mean Growth Rate
To calculate the mean, divide the total sum by the number of years (5 years):
[
\text{Mean Growth Rate} = \frac{3.8}{5} = 0.76\%
]
Thus, the mean growth rate over the period from 2007 to 2011 is 0.76%.
Explanation:
The mean growth rate is the average rate at which the annual revenue of Corning Supplies changed over the five years. To compute this, we add all the individual growth rates for each year and then divide by the number of years. This gives us a simple average, not considering the compound effects of growth over time.
Importance of Mean Growth Rate:
The mean growth rate is useful in understanding the overall trend of a company’s revenue growth over a period of years, though it doesn’t account for compounding. For example, even though the revenue grew by 5.5% in 2007 and had positive growth in 2008 and 2011, the negative growth in 2009 and 2010 dampened the overall result. The result shows that, on average, Corning Supplies experienced only modest growth over this five-year period.
However, it is important to note that the mean growth rate is a simple average and doesn’t account for the compounding effects of growth each year. If compounding growth were considered, the calculation would need to be adjusted accordingly.