Financial return calculations - part 2

In this lesson

1. 0:00 Earnings growth formula overview
2. 1:17 Understanding the nth root calculation
3. 1:40 Worked example with dividend data
4. 3:14 Calculator technique and final answer
5. 4:02 Key takeaways and summary

About this lesson

This video breaks down the formula step-by-step, shows you how to use the shift function on your calculator to input nth roots, and walks through a worked example so you can see it in action. Understanding this calculation is essential for interpreting how quickly a company's earnings or dividends are growing year-on-year, which directly supports your performance management and financial analysis studies. The video focuses on a common student challenge: using the nth root function on your calculator. You'll learn why n represents the number of growth periods (not years), how to identify the latest and earliest figures to plug into the formula, and why the formula only uses these two data points. A practical example using dividend figures demonstrates the complete calculation, from simplifying the division through to pressing shift and solving for the growth rate. If calculator functions feel tricky, the session encourages you to practise with online tutorials—this is a skill worth mastering, as it appears throughout your course and in real exam scenarios.

Duration: 5m