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Sir i want to ask sir why geometruc average growth and geometric average operating profit growth is calculated why i need that average sir ??
When calculating average rates of growth we always need to use the geometric average.
(I explain how and why it is the geometric mean in my free lectures – in the exam it is most relevant when calculating dividend growth rates).The reason for calculating the average growth rates in this question is so as to be able to comment firstly on the rate of growth in revenue (which is the most important thing to consider when looking at the performance of any company) and so as to be able to comment on the fact that the operating profit has grown more slowly than the revenue.
However, you didn’t need to actually calculate the average growth rates here in order to be able make the comments (and the calculations carried only a maximum of 3 marks if you look at the marking scheme – the other 12 marks for part (a) were all for discussion and comments.
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