The formula to calculate the net change of an asset or equity is:
\[ NC = CP - PP \]
Where:
To calculate the net change as a percent, use the following formula:
\[ NC(\%) = \left(\frac{CP - PP}{PP}\right) \times 100 \]
Net change refers to the overall difference or variation between two states or values, emphasizing the outcome rather than the individual steps to reach it. It quantifies the result obtained after considering both positive and negative factors that contribute to the change. By focusing on net change, one can assess the overall impact of various factors and determine their cumulative effect on a particular situation. It enables individuals, organizations, and systems to evaluate progress, identify trends, and measure success or failure. Net change helps to distill complex information into a single value, allowing for easier comparison and analysis.
In finance, net change is frequently used to evaluate the performance of stocks, commodities, or market indices. By comparing the closing value of a particular asset on two different dates, investors can calculate the net change to understand the overall gain or loss during that period. This information helps investors make informed decisions regarding buying, selling, or holding their investments.
Example:
Step 1: Calculate the net change:
\[ NC = 150 - 100 = 50 \text{ dollars} \]
Step 2: Calculate the net change as a percent:
\[ NC(\%) = \left(\frac{150 - 100}{100}\right) \times 100 = 50\% \]