- published: 06 Jan 2012
- views: 80165
Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from different data sets such as revenue growth of companies in the same industry.
In this example, we will compute the CAGR over three periods. Presume that the year-end revenues of a business for four years, V(t) in above formula, have been:
Therefore, to calculate the CAGR of the revenues over the three-year period spanning the "end" of 2004 to the "end" of 2007 is:
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The compound annual growth rate is a business and investing specific term for the smoothed annualised gain of an investment over a given time period. CAGR is not an accounting term, but remains widely used, particularly in growth industries or to compare the growth rates of two investments. CAGR is often used to describe the growth over a period of time of some element of the business, for example revenue and units delivered. Reference: http://en.wikipedia.org/wiki/Compound_annual_growth_rate - created at http://goanimate.com/
The CAGR or the compounded annualized growth rate of an investment in a volatile instrument such as stocks or equity mutual fund is explained. A detailed explanation can be found here http://freefincal.com/understanding-the-nature-of-stock-market-returns/
This video explains the concept of Compounded annual Growth rate (CAGR) and shows how to calculate it
Knowledge Varsity (www.KnowledgeVarsity.com) is sharing this video with the audience. In this video we are solving Time value of money problem related to the concept of Compounded Annual Growth Rate. Understand the most likely errors that can be made and also learn how to solve such type of problems in the exam.
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