Accurately Measure Compounded Growth Using Razorpay CAGR Calculator
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What is CAGR?
CAGR, or Compound Annual Growth Rate, is a measure used to understand the average yearly growth rate of an investment or business over a specific period. It takes into account the compounding effect, which means that the growth rate is calculated based on the initial investment and its subsequent earnings.
How to calculate CAGR?
Simplified steps to calculate the Compound Annual Growth Rate (CAGR):
Determine the starting value (Initial value) of your investment or asset.
Determine the ending value (Final value) of your investment or asset.
Decide on the duration of the investment or asset growth, usually measured in years.
Divide the Final value by the Initial value.
Raise the result to the power of 1 divided by the number of years.
Subtract 1 from the obtained value, then multiply by 100 to get the percentage.
The CAGR formula is as follows:
"Ending Value" represents the final value of the investment or asset at the end of the specified period.
"Beginning Value" represents the initial value of the investment or asset at the beginning of the specified period.
"Number of Years" represents the total number of years over which the investment or asset has grown.
Benefits of CAGR calculator online
There are several benefits to using an online CAGR calculator:
Accuracy: Reduces the risk of manual errors.
Convenience: Is convenient and saves time.
Speed: Provides instant results.
Simplicity: Is simple and user-friendly.
Flexibility: Offers additional features and options, such as the ability to calculate CAGR for multiple investments.
Example of CAGR
Suppose a company's revenue was 1 million rupees in the year 2020 and it grew to 1.5 million rupees in the year 2023.
To calculate the CAGR for the company's revenue growth, we can use the CAGR formula:
In this case, the beginning value is 1 million rupees, the ending value is 1.5 million rupees, and the number of years is 3.
CAGR = (1.5 million / 1 million)^(1 / 3) - 1 CAGR = 1.5^(1 / 3) - 1
Using a calculator, we can find that 1.5 raised to the power of 1/3 is approximately 1.1447. CAGR = 1.1447 - 1
Therefore, the CAGR for the company's revenue growth over the three-year period is approximately 14.47%.