## Calculate Annualised Return Using Compound Annual Growth Rate (CAGR)

**Compound Annual Growth Rate** measures the yearly compounded rate of investment growth over a period of time. It computes the smoothed rate of investment return for a specified number of years.

Simply put, if an investment generated a** 10%** annual compounded return over a **5-year** period, it means that the investment had grown 10% per year over each of the 5 years at an even pace to arrive at the final value although the actual growth rate may not equivalent to 10% each year over that 5-year period.

Let’s take an example:

– Revenue grow from RM1000 in one year to RM1500 in the next. How much growth is that?

– And what if sales grow from RM1000 to RM1500 over 3 years. How much growth is that?

**Example of Simple Growth Calculation**

To calculate simple growth, subtract the final value from the base value and divide the result by the base value. Then, multiply by 100 if you want to show it in %.

(1500-1000) / 1000 = 500 / 1000 = 0.5

((1500-1000) / 1000) * 100 = 50%

**Example of Annual Compound Growth Rate (CAGR) Calculation**