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by Anonymous on March 17th, 2004

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What is meant by the financial term CAGR and how is it measured?

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  • by 13636712 on May 20th, 2004

    13636712

    Compounded Annual Growth Rate (CAGR) ... or "Kay-Gerr" if you want to sound smart in front of finance junkies...

    Its just the compounded rate of growth of a number over several years... e.g. if you were given 10 different revenue numbers for a company and someone asked you what the company's growth was over the last decade... you would take the first and the last number and calc the CAGR.... notice if you find the growth rates of the 9 different periods and averaged them (some negative, some positive), you'll get a different number...most likely misleading... thus we use CAGR instead...

    Basically, its the growth rate over a period if it were growing in "steady state"... which isn't reality, but a simplified number to easily evaluate growth...

    CAGR=(Current Value / Beginning Value )^(1/# of Years)-1

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