CAGR definition
Hey guys,
just a small question here, I would like to know your opinion.
If you are asked to compute revenues CAGR of 2018-2020, would you use 2018 revenues as a base year or 2017?
Since it's 2018-2020, I personally take 2018 as a base, yet my boss gave me hell, that I am doing it all time wrong and 2017 here is a base.
Thanks for you opinions!
Cheers,
Adam
Not aware of any convention, but if your boss wants you to start with 2017, just admit you made a mistake and move on. It's not something worth arguing about. Continuing to dwell on it, or allowing your boss to do it is poor judgement.
Bro - His boss is an idiot though. A CAGR from 2018-2020 does NOT include 2017. OP is right.
Last thing OP needs to do is continue making his boss' mistake and have to explain why he used the wrong base to an entire deal team of experienced professionals and ruin his reputation.
Because revenue is an income statement account, it will capture all activity during the year. As we have not come to the end of 2018, I would assume it is inaccurate to use 2018 as a base. I would use 2017 as my base.
Depending on industry and revenue growth, you could project out the remaining revenue for the fiscal year; however, this would not be my preferred method. YMMV.
.
If it's CAGR 2018-2020 then it's the rate between 2018 and 2019 therefore the base is 2018
Your boss is an idiot. 2018-2020 CAGR looks at a 2-year period (2018 to 2019, and 2019 to 2020). 2018 should be the base year. If you use 2017 as the base year it would be 2017-2020 CAGR over a 3 year period.
Agree 100%
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