How to Calculate CAGR if there is a Loss in the First Year?

Compound Annual Growth Rate
Knowledge Center

 

Next Topic

Compound Annual Growth Rate > Forum > How to Calculate CAGR if there is a Loss in the First Year?

How to Calculate CAGR if there is a Loss in the First Year?
Waleed, Manager, Member
How to calculate CAGR in the following case: Profit in year 2018: 1200 Profit in year 2017: 1400 Profit in year 2006: - 500. Thanks for your suggestions... (...) Read more? Sign up for free
 

Please register now to read all responses and to join this discussion yourself. It's easy and 100% free.

Sign up for free     Log in


 
Calculating CAGR if there is a Loss in the First Year
Anonymous
You canít calculate that. Why not?
Letís look at the formula for calculating CAGR:

CAGR = (ending amount / beginning amount)(1 / # of years) Ė 1

Mathematically, because youíre taking a root of a number, if you have a negative beginning amount and a positive ending amount, youíd be taking the root of a negative number. Unless you have an odd # of years, you canít compute this mathematically without going into imaginary numbers

The best way to deal with situations where you have a negative initial value is to just footnote it and calculate CAGR based on the first positive initial value you have. So, in your example, you had a project that lost 500 in year 2016, then gained 1400 in year 2017, and ended in year 2018 with 1200, you might write the following:

Revenues went down from 1400 to 1200 during the period 2017-2018 (CAGR of -14.29%). Note that this excludes the initial 2016 year, when the project lost 500.
 

         
Special Interest Group Leader

Interested? Sign up for free.


Compound Annual Growth Rate
Summary
Forum
Best Practices


    Compound Annual Growth Rate
    Knowledge Center

     

    Next Topic



    About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
    © 2020 12manage - The Executive Fast Track. V15.4 - Last updated: 22-2-2020. All names ô of their owners.