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Organic growth
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In finance, organic growth is the process of business expansion due to increased output, sales, or both, as opposed to mergers, acquisitions, or take-overs. Typically, the organic growth rate also excludes the impact of foreign exchange. Growth including foreign exchange, but excluding divestitures and acquisitions is often referred to as core growth.
Organic growth is growth that comes from a company's existing businesses, as opposed to growth that comes from buying new businesses. It may be negative.
Organic growth figures are adjusted for the effects of acquisitions and disposals of businesses. Organic growth does include growth over a period that results from investment in businesses the company owned at the beginning of the period. What it excludes is the boost to growth from acquisitions, and the decline from sales and closures of whole businesses.
When a company does not disclose organic growth numbers, it is usually possible to estimate them by estimating the numbers for acquisitions made in the period being looked at and in the previous year.
It is useful to break down organic sales growth into that coming from market growth and that coming from gains in market share: this makes it easier to see how sustainable growth is.
Relating to organic input in an organisation, it can also relate to the act of closing down cost centres through established organic methods instead of waiting for a Finance list.[1]
The mechanisms and rate of growth of firms experiencing organic growth was extensively studied by Edith Penrose in her 1958 book "The Theory of the Growth of the Firm".[2] [3]
