Which of the following statements are correct about the Compound Annual Growth Rate (CAGR)?

(A) It can be used to compare historical returns on different investment portfolios.
(B) It helps smooth returns when growth rates are expected to be volatile and inconsistent.
(C) It is unable to track the performance of various business measures of one or multiple companies alongside one another.
(D) It can be used to calculate the average growth of a single investment.

Choose the correct answer from the options given below:

(A), (B) and (D) only

The correct answer is Option (1) → (A), (B) and (D) only

CAGR represents the constant annual growth rate that would take an initial value to a final value over a period.

(A) It is used to compare historical returns on different portfolios → correct.

(B) It smooths volatile and inconsistent growth rates → correct.

(C) It is unable to track performance of business measures together → incorrect, CAGR is widely used for this.

(D) It calculates average growth of a single investment → correct.

final answer: (A), (B) and (D)