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Forecasting
Compound annual growth rate
The single constant annual growth rate that would take a starting value to an ending value over a number of years. Smooths out lumpy years into one comparable rate.
Owned by: AnalystTest band: Analyst
The formula
CAGR = (End ÷ Start)^(1 ÷ years) − 1
In practice
Use it for multi-year comparisons; never for one year (that is just growth). Two points only — it says nothing about the path between.
The kind of thing the test asks
- Revenue grew from $1M to $1.44M over two years. The CAGR is…
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