What is YOY? How to calculate YOY in 1 minute
If you are a securities player or interested in the financial sector and regularly follow financial newspapers and magazines, you must have encountered the phrase “YOY” or “Year Over Year”, right?
In this article, we will find out what Yoy is? Meaning and calculation of Yoy comparison index.
What is YOY?
YOY is an index comparing financial results in the same period of time, applied a lot in the fields of finance and securities. In English YOY means Year Over Year
Understand more clearly, with yoy index, we can see the growth or decline of a company, an organization or the whole economy of a country at a certain time.
For example, based on the financial statements of Company A with the conclusion: compared to the same period of the second quarter of 2018, the business situation of the company in the second quarter of 2019 had a strong growth. That said, the Yoy Index for Q2 2019 was higher than the Yoy Index for Q2 2018
What does the YOY index mean in the Securities and Finance sector?
The Yoy Index is an extremely important factor in any financial report, whether it be of a company, an economic organization. Based on the Yoy index comparison, we can draw some conclusions as follows:
- Yoy shows that the business situation at the moment is tending to go up or down.
- Yoy helps to compare business results at two time periods: between two quarters of the same period, between two years, or between months.
- Yoy helps to evaluate the company’s current financial situation or not, thereby examining the effectiveness of the company’s investment.
To conclude, the Yoy Index is a commonly used factor in evaluating the efficiency of business investments on a quarterly, yearly or monthly basis.
See also: What is speculation? The 8 difference between speculation and investment
Why does YOY need to be calculated?
When it comes to the indicators that most clearly and honestly represent the performance of an economic organization, we will talk about three factors: Revenue, profit and financial index (year over year) .
These three factors change depending on the season and investors, analyzing based on these indicators to give a future direction, helping to minimize the seasonal impact on the outcome. business company.
Seasonality is like? We can take a concrete example as follows: Wearing warm clothes can only be sold in winter, and not in summer. Similarly, clothes for Tet only sell strongly at the end of the year.
So when comparing the Yoy index for warm clothing, one has to compare at two times the winter of two years, not comparing the results between winter and summer.
What advantages and disadvantages does YOY compare?
Everything has two advantages and disadvantages. The comparison of Yoy’s index is not outside this rule.
Advantage of YOY
- When comparing the Yoy index, as analyzed above, we will compare seasonal factors to bring out the most objectivity.
- The Yoy Index helps shorten the analysis, leading us to the end result. Specific example: instead of comparing the new customer development rate in April 2019 to increase by 500 people compared to March 2019, we can compare the year like April 2018 to April 2019, the guest development rate new products increased by 6000 people for example.
- Finally, the calculation of Yoy’s index is very simple, no need to use a calculator to calculate accurately.
Disadvantage of YOY
- If we compare the Yoy index by year, it means that the process of fluctuations between months of the year is ignored. Then there will be no visible risk factors that arise in the process.
- If a company has negative growth. Then any comparison of yoy figures is completely meaningless.
- Information provided is quite limited
- Gives too much meaning when a trend is observed during just one calculation period.
How to calculate YOY (update 2021)
As mentioned above, Yoy calculation is quite simple, you don’t even need to use a computer.
Step 1: Subtract the sales from this year from last year to see the difference.
Step 2: Calculate this year’s growth rate by dividing the profit difference by last year’s sales.
Step 3: Convert the calculated result in step two to%. We have Yoy stat
Example: In February 2019, company A’s revenue is 200 billion. The same period in February 2018 was 150 billion. Then the company grows, the revenue difference is 50 billion.
We have the formula to calculate the Yoy index in this case: 50/150 = 0.33 and take 0.33 x100% = 33%.
See also: What is net profit? Net profit formula (updated 2021)
Summary
Through this article, we have found out what yoy is? As well as the factors surrounding it such as personality, characteristics and meaning. Hope this article has brought useful information for you. Fastloans.PH will continue to update its knowledge and definition about finance in the coming time.
The article is from Fastloans.PH website: https://fastloans.ph/
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