Relative value of Growth Mass

Posted in Finance, Accounting and Economics Terms, Total Reads: 834
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Definition: Relative value of Growth Mass

Relative value of growth mass is an technique to compare how growth and margin improvements creates value for the shareholder.

It is based on the concept that the strategies used to create growth opportunities carries more potential than cost cutting strategies in terms of value creation.

 

It is expressed as value created by 1% growth as compared to value created by 1% margin improvement as shown below

 

Growth Mass Formulae

 

For example,

If RVG = 5. It means that 1% growth creates 5 times more value for the shareholder than increasing 1% operating profit.




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