Earn your certification as a Financial Modeling & Valuation Analyst (FMVA)®. Register today!

GROWTH Function

Calculates the predicted exponential growth by using existing data

What is the GROWTH Function?

The GROWTH Function is categorized under Statistical functions. The function helps calculate the predicted exponential growth by using existing data.

In financial analysis, GROWTH helps in preparing annual plans or forecasting revenues by the company. Let’s assume the CEO expects annual revenues to reach $1,500,000. The function can help us understand if the target is achievable or not by calculating the exponential growth.

 

Formula

=GROWTH(known_y’s, [known_x’s], [new_x’s], [const])

 

The GROWTH function uses the following arguments:

  1. Known_y’s (required argument) – It is the set of known y-values.
  2. Known_x’s (optional argument) – It is the set of known x-values. If a user provides the argument, it should be of the same length as the set of known_y’s.
  3. New_x’s (optional argument) – They are the new x_values for which we want GROWTH to return a corresponding value. If omitted, the set of [new_x’s] is assumed to be the same as the [known_x’s] and the function returns the y-values that lie on the calculated exponential growth curve.
  4. Const (optional argument) – It is a logical value that whether the constant ‘b’ in the equation y = b * m^x, should be forced to be equal to the value 1.
    • If const is TRUE or omitted, b is calculated normally.
    • If const is FALSE, b is set equal to 1 and the m-values are adjusted so that y = m^x.

 

How to use the GROWTH Function in Excel?

To understand the uses of the GROWTH function, let’s consider a few examples:

 

Example 1

Let’s assume we wish to know if sales of $15 million are possible or not for the coming financial year. So:

  • Known_y’s are the revenue values that we know.
  • Known_x’s are the years for which revenue data are available.
  • New_s’s are the years for which we want to predict the revenue.

Suppose we are given the following data:

 

GROWTH Function

 

In the above example, the known_y’s are the revenue figures in column C, whereas the known_x’s are the year information in column B. The new_x is B13.

The formula to use will be:

 

GROWTH Function - Example 1

 

Remember as we are providing a cell reference, so no quotation marks required. We get the result below:

 

GROWTH Function - Example 1a

 

From the result above, $1,500,000 seems not possible, but $1,023,180 seems more achievable.

 

Example 2

Continuing with the same example, if we wish to find out the revenue that is more than one new y-value, we need to use the array formula. The function should be entered as an array formula.

For this, we will enter an array formula then highlight the range of cells for the function result. First, we will type the function into the first cell of range and then press CTRL-SHIFT-Enter, as shown below:

 

GROWTH Function - Example 2

 

We get the result below:

 

GROWTH Function - Example 2a

 

As you can see above, the GROWTH function was entered into cells C13-C15 and the function in the formula bar is encased in curly braces { }. It indicates that the function was entered as an array formula.

 

Few notes about the GROWTH function

  1. #REF! error – Occurs if the [known_x’s] array is of a different length compared to the known_y’s array.
  2. #NUM! error – Occurs if any of the values in the known_y’s array is less than or equal to zero.
  3. #VALUE! error – Occurs if any of the values provided is non-numeric for known_y’s, [known_x’s] or [new_x’s] arrays.
  4. If we wish to see the GROWTH function visually, we can create a scatter chart of the data without displaying a line. The exponential option uses the function while the linear option uses the TREND function.

 

Click here to download the sample Excel file

 

Additional resources

Thanks for reading CFI’s guide to important Excel functions! By taking the time to learn and master these functions, you’ll significantly speed up your financial analysis. To learn more, check out these additional resources:

  • Excel Functions for Finance
  • Advanced Excel Formulas Course
  • Advanced Excel Formulas You Must Know
  • Excel Shortcuts for PC and Mac

Free Excel Tutorial

To master the art of Excel, check out CFI’s FREE Excel Crash Course, which teaches you how to become an Excel power user.  Learn the most important formulas, functions, and shortcuts to become confident in your financial analysis.

 

Launch CFI’s Free Excel Course now to take your career to the next level and move up the ladder!