Quantitative
CAGR (compound annual growth rate)
The steady yearly growth rate that links a start value to an end value.
Last reviewedWhat does CAGR (compound annual growth rate) mean?
CAGR is the constant yearly rate that would take a value from its start to its end over a number of years: (end divided by start) to the power of 1 divided by the number of years, minus 1. Revenue of 100 growing to 121 over two years has a CAGR of 10%, because 100 × 1.1 × 1.1 = 121. Dividing the total growth (21%) by two years gives 10.5%, which overstates it because growth compounds.
Where does it come up in case interview prep?
Related terms
- Rule of 72Years to double is about 72 divided by the growth rate.
- Percent versus percentage pointsA change in a rate is measured in points; its relative change in percent.
- ExhibitA chart or table the interviewer hands you to reason from.
- Weighted averageAn average where each part counts in proportion to its size.
- Lakh and croreIndian number units: 1 lakh = 100,000 and 1 crore = 10 million.
- Run rateCurrent performance scaled up to a full year.
- Market sizingEstimating how big a market or quantity is.
- Top-down sizingStart from a big total and narrow it down.