compound annual growth rate – n : often referred to by
abbreviation CAGR; the annual growth in revenues – of a company, a market niche
or an industry – factoring in annual compounding (similar to the concept of
compound interest).
Example:
If
market niche has aggregate revenues of $100 million in the year 2001, and then experiences
a CAGR of exactly 20% over the next three years, then its 2002 revenues are
(1.20 x $100,000,000 = $120,000,000); its 2003 revenues are (1.20 x
$120,000,000 = $144,000,000); and its revenues in 2004 are (1.20 x $144,000,000
= $172,800,000). In other words, compounding means that the interest rate is
applied to previous period’s numbers.
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Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
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