imported>Doug Williamson |
imported>Doug Williamson |
| (6 intermediate revisions by the same user not shown) |
| Line 1: |
Line 1: |
| Compound Annual Growth Rate. | | Compound Annual Growth Rate. |
|
| |
|
| |
| The compound annual growth rate is calculated from total growth over a longer period as:
| |
|
| |
| CAGR = ( End amount / Starting amount )<sup>(1/n)</sup> - 1
| |
|
| |
| ''Where:''
| |
|
| |
| n = number of years between the two points sampled
| |
|
| |
|
| |
| <span style="color:#4B0082">'''Example 1'''</span>
| |
|
| |
| Sales have grown from $100m to $150m over the most recent 2-year period.
| |
|
| |
| The CAGR is:
| |
|
| |
| = ( 150 / 100 )<sup>(1/2)</sup> - 1
| |
|
| |
| = 22.5%.
| |
|
| |
|
| |
| During this particular 2-year historical period, sales were growing at an average rate of 22.5% per annum.
| |
|
| |
| However, this is not evidence about any other periods, particularly not future periods.
| |
|
| |
|
| |
| <span style="color:#4B0082">'''Example 2'''</span>
| |
|
| |
| The same formula can be used to calculate a compound annual growth rate, based on a ''shorter'' sampling period.
| |
|
| |
| Sales grew from $100m to $115m over a historical period of 3 months (= 0.25 years).
| |
|
| |
| The CAGR caclulated from this data is:
| |
|
| |
| = ( 115 / 100 )<sup>(1/0.25 = 4)</sup> - 1
| |
|
| |
| = 74.9%.
| |
|
| |
|
| |
| During this particular 3-month period, sales grew at a rate of 74.9% per annum.
| |
|
| |
| On its own, this is NOT evidence that sales will continue to grow at this rate during the remaining 9 months of the year, nor indeed in any other period.
| |
|
| |
| Proper use of this kind of analysis will investigate the ''reasons'' for the figures, and then respond appropriately.
| |
|
| |
|
| |
|
|
| |
|
| == See also == | | == See also == |
| | * [[Compound Annual Growth Rate]] |
| * [[Compound interest]] | | * [[Compound interest]] |
| | * [[Extrapolation]] |
| | * [[Geometric mean]] |
| * [[YOY]] | | * [[YOY]] |
| * [[Extrapolation]]
| | |
| | [[Category:Investment]] |
| | [[Category:Financial_products_and_markets]] |
