***************

I regularly receive emails from readers posing questions based on my previous posts on things like how to calculate NPV, using XIRR, and other financial and Excel questions.

One of the most common questions I receive is how to calculate a compound annual growth rate when the beginning value is negative.

The basic answer is that you can’t. Why?

Let’s look at the formula for calculating CAGR:

CAGR = (ending amount / beginning amount)

CAGR = (ending amount / beginning amount)

^{(1 / # of years)}– 1Mathematically, because you’re taking a root of a number, if you have a negative beginning amount and a positive ending amount, you’d be taking the root of a negative number. Unless you have an odd # of years, you can’t compute this mathematically without going into imaginary numbers

Even if you do happen to have (or force) a negative # of years, the result will also be a negative growth rate, which also doesn’t make sense in terms of what’s going on.

The best way to deal with situations where you have a negative initial value is to just footnote it and calculate CAGR based on the first positive initial value you have. So, for example, if you had a project that lost $500 in year 2003, then gained $100 in year 2004, and ended in year 2007 with $500, you might write the following:

*Revenues grew from $100 to $500 during the period from 2004-2007 (CAGR of 71%). Note that this excludes the initial 2003 year, when the project lost $500.*

Remember, your goal is to present an accurate picture of what’s going on. That almost always means using a few more words to reflect and explain reality rather than just provide a single, calculated figure.

As a reminder, you can also always use the online financial calculators on this site to do some quick calcs and checks if you need to :)

***************************************************

**Look Good at Work and Become Indispensable Become an Excel Pro and Impress Your Boss**

***************************************************

## Business blog » Blog Archive » Calculating CAGR (compound annual growth rate) when the beginning …

[…] Read the rest of this great post here […]

## BizBlogged

Thanks for posting a useful calculation content.. How Blogging is effective can be determined by this kind of posts.

Finance blog, finance, economics, Corporate finance, Personal finance, Investing, Marketing

## Andrew Knight

Hi Experiments in Finance,

I’m emailing you in regards to an email I sent to you last month about a partnership, have you had a chance to think about it?

If you have any questions or would more information, please advise me and we can go from there.

Kind Regards,

Andrew Knight.

Website Manager

Banking & Finance Division

Asia-Pacific Region

Online Marketing Group Pty Limited

Email: andrew.knight@omg.com.au

Web: http://www.omg.com.au

## Caren

Hi,

My name is Caren.

I find your site http://www.experiglot.com/ extremely interesting!

I have a few good credit card websites that could be useful for your readers. They have many visitors, high Alexa rank and PR from 0 to 4 and one of them takes its place in the Google top 10 credit card sites.

I would like to buy a link in a fresh post or at some pages of your site.

Please let me know if you are interested and how much you charge via email.

Thank you for your time,

Regards,Caren.

## eyelash tint

The report also reviews the competitive landscape, key pipeline products and technology offerings.

Now there is a product that you do not need a prescription and is

1/2 the price of competitors like Latisse, and this is Altisce.

Take off the makeup slowly and softly; take care of your eyelashes by treating them gently, right.

## Coy

Link exchange is nothing else but it is simply placing the other person’s weblog link

on your page at suitable place and other person will also do similar in

support of you.

## indian bride groom

Actually no matter iif someone doesn’t be aware of afterward its up to other users that they will help, so here

it occurs.

## Anonymous

First of all I would like to say superb blog!

I had a quick question in which I’d like to ask if you do

not mind. I was curious to find out how you center yourself

and clear your thoughts before writing. I have had difficulty clearing my

thoughts in getting my thoughts out there. I do enjoy writing however it just seems like the first 10 to 15 minutes are generally lost just trying to figure out how to begin.

Any recommendations or hints? Many thanks!

## related site

Hi! I’m at work surfing around your blog from my new apple iphone!

Just wanted to say I love reading your blog and look forward to all your posts!

Keep up the great work!

## Belinda

My brother recommended I may like this web site.

He used to be totally right. This submit truly made myy day.

You cann’t believe just hhow a lot time I had spent foor this info!

Thank you!

## comment creer un blog

Wonderful blog! I found it while browsing on Yahoo News.

Do you have any suggestions on how to get listed in Yahoo News?

I’ve been trying for a while but I never seem to get there!

Many thanks

## discours de mariage

Un discours de mariage r

## komal

THANKS FOR THE INFO

## Shiva

Hi! I was hoping you could explain the calculation of CAGR for a scenario in which all numbers are negative but each subsequent number is bigger than it’s preceding number (in other words, every succeeding number is getting closer to 0 but the progression hasn’t got to 0 yet)..

Came across this situation when i was looking at the cash flows of a start up where initial years have huge negative cash flows but the situation improves each year with growing revenues… Thanks!

## Jae Jun

Thanks for the answer. Cleared things up about the negative CAGR.

Old School Value

## Compound Growth Rate quick table calculation in Tableau - The Data School

[…] start value and a positive end value then this would mean taking the root of a negative number. (http://www.experiglot.com/2008/09/15/calculating-cagr-compound-annual-growth-rate-when-the-beginning…). When using profit for instance, the first sum of sales value is negative and subsequently only […]

## Please Leave a Comment!