How to Calculate Annual Growth Rate

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Annual Growth Rate (AGR) Calculator

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Understanding and Calculating Annual Growth Rate (AGR)

The Annual Growth Rate (AGR) is a fundamental metric used to understand how a particular value has changed over a period of one year. It's commonly applied in various fields, including finance, economics, and business, to measure the percentage increase or decrease of metrics such as revenue, profit, customer base, or even the value of an investment over a single year.

What is Annual Growth Rate?

AGR specifically looks at the growth from one year to the next. If you are looking at a growth over multiple years, you would typically calculate the Compound Annual Growth Rate (CAGR). AGR is simpler and focuses on the direct change within a 12-month period.

How to Calculate Annual Growth Rate

The formula for calculating the Annual Growth Rate is straightforward:

AGR = ((Ending Value – Starting Value) / Starting Value) * 100

In this calculator, we've slightly adapted it to account for growth over multiple years. If you input the value at the *beginning* of your measurement period, the value at the *end* of your measurement period, and the *total number of years* elapsed, the calculator will determine the average annual growth rate. The formula used here is:

Average AGR = (((Ending Value / Starting Value)^(1 / Number of Years)) – 1) * 100

Breaking down the formula:

  • Ending Value: The value of the metric at the end of the period you are measuring.
  • Starting Value: The value of the metric at the beginning of the period you are measuring.
  • Number of Years: The total duration (in years) over which the change occurred.

Example Calculation

Let's say a company's revenue was $100,000 at the beginning of 2020 and $150,000 at the end of 2024. This represents a period of 4 years.

  • Starting Value = $100,000
  • Ending Value = $150,000
  • Number of Years = 4

Using the calculator with these inputs:

AGR = (((150,000 / 100,000)^(1 / 4)) – 1) * 100

AGR = (((1.5)^(0.25)) – 1) * 100

AGR = ((1.10668) – 1) * 100

AGR = (0.10668) * 100

AGR ≈ 10.67%

This means the company's revenue grew at an average annual rate of approximately 10.67% per year over those four years.

Why is AGR Important?

Understanding AGR helps in:

  • Performance Evaluation: Assessing how well a business, investment, or economic indicator is performing year over year.
  • Forecasting: Using historical growth rates to predict future values.
  • Comparisons: Comparing the growth trajectories of different entities or assets.
function calculateAGR() { var startingValue = parseFloat(document.getElementById("startingValue").value); var endingValue = parseFloat(document.getElementById("endingValue").value); var numberOfYears = parseFloat(document.getElementById("numberOfYears").value); var resultDiv = document.getElementById("result"); if (isNaN(startingValue) || isNaN(endingValue) || isNaN(numberOfYears) || startingValue <= 0 || numberOfYears <= 0) { resultDiv.innerHTML = "Please enter valid positive numbers for all fields."; return; } // Formula for Average Annual Growth Rate over multiple years var agr = Math.pow((endingValue / startingValue), (1 / numberOfYears)) – 1; var agrPercentage = agr * 100; resultDiv.innerHTML = "Average Annual Growth Rate: " + agrPercentage.toFixed(2) + "%"; }

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