If a company's revenue increased from $200,000 to $250,000, what is the percentage increase?

Question

Accepted Answer

25%. The percentage increase is calculated by dividing the change in value by the original value and multiplying by 100. The change is $250,000 - $200,000 = $50,000. Dividing by the original value: $50,000 / $200,000 = 0.25, which equals 25%.

20% would result from dividing the change ($50,000) by the new value ($250,000) instead of the original value, which is a common error in percentage change calculations. 30% does not correspond to any logical calculation with these numbers and would require an increase of $60,000 rather than $50,000. 50% would result from incorrectly calculating $250,000 / $200,000 - 1 as 50/100 or from confusing the ratio of $50,000 to $100,000 with the correct calculation.

Percentage increase calculations are essential in business for measuring growth in revenue, profits, costs, and other financial metrics. The DSST exam consistently tests this skill, and students must remember to always divide by the original (starting) value, not the new (ending) value, when computing percentage changes.

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