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May 31, 2024
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there is a negative. Shift the year forwards or back until there isn't a negative and then footnote it in the book.
so are you saying its impossible to compute a CAGR if the beginning value must be negative. Lets throw in some variables say beginning is -5000 and ending is 200 over the course of 3 years...how would I compute it, assuming I must use those numbers?
A CAGR for annualized growth from a negative to a positive number can be calculated if the number of time periods is odd but doesn't make sense.
Take your example:
The growth rate would have to solve the equation
-5000*(1+g)^3=200
This can be solved to yield g=-1.344, implying annual growth of -134.4% - however, this doesn't make sense:
After a year, you would have "grown" from -5000 to 1720, then back to -585 and back to 200, but this is not what you would expect from a CAGR.
Note also that the calculation no longer works if the number of years is even, so you'd be best of following LdnMezz's suggestion and just shifting until you get a proper result.
So, my five math geek minutes of the day are over, back to work on those comps... :)
true, it does work mathematically with that formula, but does an increase from -5000 to 200 really make sense as a negative 134.4% growth??
yeah, my point was that although you can calculate it mathematically, it doesn't really make sense, so you're best of either not showing it at all or finding a work-around so you get to use all positive numbers - just check with your associate what he wants to see
"NM"
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