How to Calculate Compound Annual Growth Rate in Microsoft Excel

By | January 20, 2017

In this video we show you How to Calculate Compound Annual Growth Rate in Microsoft Excel CAGR – Compound annual growth rate is a simply the rate at which something grows over a period of years taking into account the effect of compouding. Compound annual growth rate 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. The GDP of Eqypt in 2011 was 30,058 billion and in 2016 this grew to 58,137 billion. Without going into the calculations, the CAGR over 2011 to 2017 is 7.6%. This means that if the GDP grew at 7.6% every year from 2007, then in 2017 the GDP would be 58,137 billion. It is important to note that CAGR is an imaginary term. It serves purely as an indicator that tells you what a number (in this case GDP) has grown over a period of time assuming that it grew at a steady rate. In reality the actual growth rates are likely to be different for each year. If you’re looking to understand CAGR in much greater detail, I recommend reading Investopedia’s article Compound Annual Growth Rate: What You Should Know. Before we dive into Excel, let’s understand the how calculate the compound annual growth rate. The formula is:
CAGR = (Ending value / Beginning value)^(1/n) – 1
where n is the number of years Site:
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