Editor's note: Welcome to "Booyah Breakdown," an explanation of certain terms and topics Jim Cramer discusses on his "Mad Money" TV show. Feel free to ask a question if you're confused about something Cramer talks about, but please keep in mind that we do not provide advice on specific stocks.

My son and I walked past the new Porsche Cayman the other day, and I got excited and said, "That car is hot!"

And my super-bright 5-year-old responded by saying, "But Mommy, I just touched it, and it's actually pretty cold."


So I proceeded to explain that sometimes when things are really cool, we say they're hot.

And he looked at me like I was the stupidest woman in the world.

So I retracted my original statement and said, "That car is beautiful, and I bet it goes really fast."

"Yeah, like 1,000 miles per hour!" he said

Now we're on the same page. Clearly, there's no place for slang when you're trying to teach someone the English language.

Or any language for that matter. And if you're dabbling in the stock world, you need to understand its language as well. But the pundits get colloquial and use their own sort of slang sometimes. They speak quickly and throw out abbreviations or acronyms, and then many of us have no idea what they're talking about.

One of these terms that is often thrown around without explanation is growth rate. Jim Cramer mentions it on "Mad Money" constantly, saying he won't buy a company that has a P/E of more than two times its growth rate. So, if a company's growth rate is 30%, its P/E better be below 60, or he's not going near it.

And while we tackled the P/E ratio last week , the growth rate still has many of you stumped.

So What Are They Talking About?

"The growth rate of a company generally refers to the rate of growth of the corporate earnings," says Frank Fernandez, chief economist at the Securities Industry Association.

That means that when pundits mention a company's growth rate, they're generally referring to how earnings have grown from one period to the next.

To watch Tracy Byrnes' video take of this column, click here .

Some pros will discuss revenue growth or sales growth -- but they should be very clear about that. Ideally, a pro shouldn't use "growth" interchangeably between earnings and revenue without distinction.

So you can assume that when someone mentions a company's growth, they're referring to its earnings growth. As a refresher: Earnings are basically revenue minus the cost of sales, operating expenses, taxes and depreciation, etc., over a given period of time. Earnings give investors an indication of the company's potential to expand. So they're important, and the pros like to see how fast they're growing.

Calculating an earnings growth rate is actually pretty simple.

It's just your basic percentage-change calculation. The accounting folks call it an analytical. You can find a percentage-change calculator on the Web, like this one , or easily crunch the numbers yourself.

You take the earnings-per-share number from the current period, subtract the EPS number from the previous year's period and then divide by the previous period's EPS. Multiply the final number by 100 to get a percentage.

Let's try an example.

I pulled up Microsoft's ( MSFT) quote on Zacks.com, which has clear EPS and growth-rate info.

First, find the most recent EPS. Microsoft will announce its quarterly results on July 20, so we don't have an exact EPS number. We'll just go with the average estimate for now, which is 30 cents.

The EPS for the same quarter last year was 32 cents. So now you can plug the numbers into the equation and we calculate the growth rate: 0.3 - 0.32 / 0.32 x 100 = -6.25%. So the pros would say that Microsoft had a 6.25% decrease in quarterly earning growth.

Now let's find a yearly growth rate. That means we're going to use EPS numbers that take into account a full year's worth of numbers. The numbers above were quarterly numbers, and therefore only represented the three-month period from April 1 to June 30.

This year's estimated EPS is 1.26. And the EPS for fiscal 2005 was 1.24. So calculate: 1.26 - 1.24 / 1.24 x 100 = 1.6%.

That's easy math. And now you know that the pros are only expecting a 1.6% earnings growth for the year.

Ideally, you should calculate growth over the last five to 10 years, says Bob O'Hara, vice president of development at investment-education organization BetterInvesting.com. Then you can get a real feel for the path the company has been on.

You may also hear the talking heads on TV mention projected growth rates. Those include forecasted numbers.

Let's calculate a growth rate for Microsoft's fiscal year ending June 30, 2007. That means we're looking for a year-over-year projected earnings growth rate.

We know that this year's estimated EPS is 1.26. The 2007 estimate is 1.39, according to Zacks.com. Since we're going forward to a future point in time, the 2006 number will be considered the previous period. So crunch (or drop the numbers into that percent-change calculator): 1.39 - 1.26 / 1.26 = 10.3.

So that means EPS is expected to increase 10.3% by this time next year.

That may sound like a big jump from the current year's 1.6% growth rate, but remember, these numbers are useless unless you compare them to the company's peers and get a perspective on what's normal.

Hard to Get Good Help

While I think everyone should crunch a few numbers now and again, there's really no need. Top-notch research firms have done all this number-crunching for you, and many of them offer their reports on the Web for free. So read them and use their growth numbers. Just take comfort in the fact that you now know how that number was generated.

Be aware, however, that the proliferation of information on the Web helps and hurts. Be careful about what you read. Not everything is policed, so be sure to pull up reliable sites and research reports

And keep sending us your questions . At least you know you can trust us to cut through the slang and help get you educated.

And I promise never to use dope, phat, da bomb or bootylicious when describing something that's way cool.
Tracy Byrnes is an award-winning writer specializing in tax and accounting issues. As a freelancer, she has written columns for wsj.com and the New York Post and her work has appeared in SmartMoney and on CBS MarketWatch. Prior to freelancing, she spent four years as a senior writer for TheStreet.com. Before that, she was an accountant with Ernst & Young. She has a B.A. in English and economics from Lehigh University and an M.B.A. in accounting from Rutgers University. Byrnes appreciates your feedback; click here to send her an email.