Annual Growth Rate

Business, Legal & Accounting Glossary

Definition: Annual Growth Rate



Full Definition of Annual Growth Rate


Annual Growth Rate is used to describe the growth of some element of a business (revenue, units delivered, etc.).  The annual growth rate can be expressed in terms of an average or compound. Compound Annual Growth Rate (CAGR) is generally used as it reduces the effect of the volatility of periodic returns that can render an Average Annual Growth Rate (AAGR) meaningless.

The formula for Average Annual Growth Rate is the Arithmetic Mean Return or sum of annual revenue changes divided by the number of years. Compound Annual Growth Rate is calculated as the geometric mean of 1 plus each year’s return.

Interpretation

The Annual Growth Rate can be used for communicating the average returns of investment funds and comparing the performance of investment advisers. However, the Annual Growth Rate will not include any indication of the investment’s volatility or overall risk.


Cite Term


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Page URL
https://payrollheaven.com/define/annual-growth-rate/
Modern Language Association (MLA):
Annual Growth Rate. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. December 01, 2020 https://payrollheaven.com/define/annual-growth-rate/.
Chicago Manual of Style (CMS):
Annual Growth Rate. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/annual-growth-rate/ (accessed: December 01, 2020).
American Psychological Association (APA):
Annual Growth Rate. PayrollHeaven.com. Retrieved December 01, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/annual-growth-rate/

Definition Sources


Definitions for Annual Growth Rate are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd March, 2020 | 0 Views.