What Is Decrease Percentage Formula?
Decrease Percentage is used to determine the decrease in two values (final value and initial value) in percentage terms, and according to the formula, the initial value is subtracted from the final value. The resultant is divided by the initial value and multiplied by 100 to derive the decreased percentage.
Thus, it is a calculation that shows by how much percentage a value has decreased from the initial or the original value. It is very useful iin the field of finance to assess the fall in the stock price or market indices over a period of time. It can be used by individuals trying to evaluate investment opportunities of companies trying to assess the financial statements.
- Decrease percentage calculates the percentage reduction in two values (the final value and the beginning value), and the formula subtracts the starting value from the absolute value. To calculate the lowered percentage, divide the result by the beginning number and multiply by 100.
- It finds the proportion by which the underlying value has reduced in reality. In finance, it is also used to calculate how much the value of the shares has declined or how much the whole portfolio has decreased.
- It is frequently used in finance to calculate the value of the shares that have fallen in percentage terms or how much the whole portfolio has decreased.
Decrease Percentage Formula Explained
The decrease percentage formula is a metric used to calculate the percentage fall in any value over a period of time. It can be related to prices of quantity. It can be used to measure the reduction in the prices of any financial instrument like stocks, bonds, commodities, etc and is very useful for investors in taking informed investment decisions.
The management of the business entities can use this metric of formula for percentage decrease to make investment or expansion decisions because it helps them to evaluate whether the projects or investments are giving any negative return, which means that the project is no longer feasible.
It is an excellent metric for comparing balance sheets year on year to understand the company’s positions of assets and liabilities. The revenue growth on a year-on-year basis can be compared to identify any profit percentage reduction, which will lead to assessing the reasons behind the fall.
The concept may also be related to the calculation of fall in the population of a country. The same method can be applied to find the population reduction and help governments devise plans and programs for economic development based on the situation of population in the country.
Let us try to understand the concept of the formula for percentage decrease with the help of some simple examples.
If we buy a laptop for $750 and after a year, we want to change the laptop because the technology has evolved, and our need has also changed to the extent that we need the upgraded version with more space and speed, and performance. If you want to sell the laptop after a year, the market value of the laptop will become $400 even though it is only one year old and is kept in excellent condition. We can find the percentage decrease for the laptop with the help of the percentage decrease formula.
In the real world, most commodities or items lose their market value after buying them. This situation is applicable in the case of a laptop.
The following is given data for calculating the laptop’s decreased percentage.
Therefore, the calculation of the percent decrease formula excel is as follows,
= ($400 – $750)/$400
Percentage Decrease will be –
- Decrease Percentage = -47%
In this example, for the price of the laptop, we can see that the percentage decrease in the value of the laptop is 47%. The reason for the decrease in prices is an advancement in technology, and also, in general, in the real world, the value of an underlying decreases in market value once one user uses it.
Suppose we buy a car for $35,000, and after three years, we want to sell the old car and buy a new car as our needs and requirements have changed. If you sell the car after three years, its market value will become $20,000, even though it is only three years old and is kept in perfect condition. We can find the percentage decrease for the car with the help of the percent decrease formula excel.
In the real world, most commodities or items lose their market value after buying them. This situation is applicable in the case of a car.
The following is given data for calculation of the decreased percentage of the car.
Therefore, the calculation of the percentage decrease is as follows,
= ($20,000 – $35,000)/$20,000
Percentage Decrease will be –
- Decrease Percentage = -43%
In this example, for the price of the laptop, we can see that the percentage decrease in the value of the laptop is 43%. The reason for the decrease in prices is an advancement in technology, and also, in general, in the real world, the value of an underlying decreases in market value once one user uses it.
Let us look at a more practical example to use the formula to calculate percentage decrease. The price of Brent crude in NYMEX was $78 per barrel a year back. It is trading at $ 67 currently. We can find the percentage decrease for Brent crude oil with the help of the percentage decrease formula.
Below is given data for calculation of the percentage decrease of Brent crude.
Therefore, the calculation of
Therefore, the calculation below will explain how to find percentage decrease formula
which is as follows,
= ($67 – $78)/$67
Percentage Decrease will be –
- Percentage Decrease = -14%
In this example, for the price of the laptop, we can see that the percentage decrease in the value of the laptop is 14%.
You can use the following Decrease Percentage Calculator.
|Decrease Percentage Formula =
The formula to calculate percentage decrease is a very important and useful metric and used in various types of situations in a number of ways. Given below are some of the benefits of the calculation.
- The percentage decrease equation helps in determining the percentage by which the value of the underlying has decreased in actuality. It is also used in finance to determine how much the value of the shares has decreased or how much the overall portfolio has decreased.
- It also helps a great deal in making comparisons. For example, suppose the portfolio has seen a percentage decrease and the index the portfolio is trying to track and emulate has also decreased. In that case, the formula helps in comparing which of the two has fallen more, thus helping in deciding on whether to make any changes to the portfolio.
- Percentage decrease is a fundamental mathematical concept to find the difference between the final value and the initial of any underlying. The method that explains how to find the percentage decrease formula is used to find the difference between the absolute value of an underlying and the initial value of the identical underlying and then divide that difference by the initial value. This will give us a percentage decrease in the value of an underlying. The percentage decrease is essential as, in real life, most items lose their value when bought or taken out of the shop or showroom.
- The percentage decrease is an important concept as, in real life, most items lose their value once bought or used by one user. The percentage decrease equation is also used a lot in the world of finance to determine how much the value of the shares has decreased in percentage or how much the overall portfolio has decreased. The percentage decrease equation is also used to find the percentage decline across commodities to make comparisons.
The calculation has some limitations which are as follows:
- It is difficult to decide the direction of fall in value. The calculation deducts the final decreased value from the original higher value. If the values are reversed, then the result will be an increase.
- When the comparison is made using the formula, it just gives a relative measure. However, the magnitude and the context of the calculation should also be taken into account to understand and interpret it accurately.
- The formula does not consider any fixed time frame for comparison. It just calculated the decrease at a particular point in time which is not very relevant for comparison.
- A comprehensive view cannot be acquired if only a percentage change is considered. Various other metrics like some important ratios, absolute values, etc and other external factors should also be accounted for.
Thus, as given above, the method has a number of limitations that should be kept in mind while using the formula.
Frequently Asked Questions (FAQs)
To do this, insert the old value in the first column and the new value in the second column. Then, to get the percent change, insert the formula = (B2-A2)/A2 in the third column. This method may also be used to calculate percent change for many numbers simultaneously.
First, compute the difference (decrease) between the two compared numbers. Then, increase the result by 100 after dividing the reduction by the original number. If your response is negative, this represents a percentage increase.
Divide the percentage drop by 100 to get the decimal equivalent. Then, multiply the resultant decimal by the initial value. Finally, subtract this value from the beginning value. It is the new value based on the supplied percentage drop.
This has been a guide to the Decrease Percentage Formula. Here we discuss how to calculate Percentage Decrease with examples and a downloadable excel template. You can learn more about financing from the following articles –
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