Furniture World saw a growth in sales from 2019 to 2022 from £53M to £76M. Assuming sales increased by the same % year-on-year in this timeframe, what is the CAGR (Compound Annual Growth Rate) from 2019 to 2022?
Give your answer as a percentage, rounded to 2 significant figures.
Do we use 3 years or 4 years for the value of n in the CAGR equation?
Thanks
3 years - you are measuring the growth across 3 intervals, 2019 to 2020, 2020 to 2021, and 2021 to 2022. That gives you 3 years of compounding
To do this kind of question, I’d suggest simply counting the intervals year by year:
2019 → 2020
2020 → 2021
2021 → 2022
That gives you 3 years, so n = 3 in the CAGR formula.
I see you've received some useful answers already.
Adding here another resource you might find useful if you're currently working on calculation questions:
• • Cheatsheet: The Must-Know Consulting Terms for Interviews
Best,
Cristian
hey!
I would it do as follows: You use 3 years in the CAGR formula because CAGR is based on the number of growth intervals, not the number of calendar years listed. From 2019 to 2022 you have three intervals (2019→2020, 2020→2021, 2021→2022). Using the formula CAGR=(76/53)1/3−1, the ratio is about 1.434, the cube root is about 1.127, so the CAGR is roughly 12.7%, which rounds to 13% to two significant figures.
BR Alessa
Three years! I'd suggest doing a difference (2022-2019 = 3) and not counting -- because counting might lead you to count 2019, 2020, 2021, 2022 and answering 4!
Best,
Tom
