Compound Annual Growth Rate and Critical service provider: Difference between pages

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(CAGR).
1. ''Supply chain - suppliers - financial services.''


The compound annual growth rate (CAGR) is calculated from total growth over a longer period as:
A service provider that provides critical services to a financial institution.


CAGR = (End amount / Starting amount)<sup>(1/n)</sup> - 1
''(Source - Financial Stability Board (FSB).)''


''Where:''


n = number of years between the two points sampled
2.  ''Supply chain - suppliers.''


Similar situations and dependencies in other sectors.


===<span style="color:#4B0082">Example 1: Sales growth over two years</span>===


Sales have grown from $100m to $150m over the most recent 2-year period.
==See also==
 
* [[Critical service]]
The CAGR is:
* [[Critical third parties]]  (CTP)
 
* [[Financial authority]]
= (150 / 100)<sup>(1/2)</sup> - 1
* [[Financial institution]]
 
* [[Financial services]]
= 1.5<sup>(1/2)</sup> - 1
* [[Financial Stability Board]]  (FSB)
 
* [[Intra-group service provider]]
= 22.5%.
* [[Law]]
 
* [[Nth-party service provider]]
 
* [[Outsourcing]]
During this particular 2-year historical period, sales were growing at an average rate of 22.5% per annum.
* [[Service provider]]
 
* [[Supply chain]]
However, this is not evidence about any other periods, particularly not future periods.
* [[Systemic third-party dependency]]
 
* [[Third party]]
 
* [[Third-party risk]]
===<span style="color:#4B0082">Example 2: Sales growth over three months</span>===
* [[Third-party service provider]]
 
* [[Third-party service relationship]]
The same formula can be used to calculate a compound annual growth rate, based on a ''shorter'' sampling period.
 
Sales grew from $100m to $115m over a historical period of 3 months (= 0.25 years).
 
The CAGR caclulated from this data is:
 
= (115 / 100)<sup>(1/0.25)</sup> - 1
 
= 1.15<sup>4</sup> - 1
 
= 74.9%.
 
 
During this particular 3-month period, sales grew at a rate of 74.9% per annum.
 
On its own, this is NOT evidence that sales will continue to grow at this rate during the remaining 9 months of the year, nor indeed in any other period.
 
Proper use of this kind of analysis will investigate the ''reasons'' for the figures, and then respond appropriately.
 
 
 
== See also ==
* [[Compound interest]]
* [[Extrapolation]]
* [[Geometric mean]]
* [[YOY]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Corporate_finance]]
[[Category:Investment]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]

Latest revision as of 10:51, 18 January 2024

1. Supply chain - suppliers - financial services.

A service provider that provides critical services to a financial institution.

(Source - Financial Stability Board (FSB).)


2. Supply chain - suppliers.

Similar situations and dependencies in other sectors.


See also

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