# Thread: compound annual rate?

1. ## compound annual rate?

Hello Everyone,

Can you explain more about compound annual rate in the following paragraph? Can you offer some examples about compound here?

Our success shows in earnings per share that have grown at an average compound annual rate of 24 percent. Our operating margins have increased by more than 65 percent. We have reduced working capital investments by about 56 percent, increased inventory turnover by nearly 43 percent, reduced outstanding receivables by over 15 percent, and saved \$150 million in purchasing costs via a corporate-wide strategic sourcing initiative.

And I search by google that there is total receivables? Are outstanding receivables and total receivables the same in meaning?

Regards

Sky

2. ## Re: compound annual rate?

Originally Posted by sky753
Hello Everyone,

Can you explain more about compound annual rate in the following paragraph? Can you offer some examples about compound here?

Our success shows in earnings per share that have grown at an average compound annual rate of 24 percent. Our operating margins have increased by more than 65 percent. We have reduced working capital investments by about 56 percent, increased inventory turnover by nearly 43 percent, reduced outstanding receivables by over 15 percent, and saved \$150 million in purchasing costs via a corporate-wide strategic sourcing initiative.

Regards

Sky
There are two common types of interest rates: Simple and Compound.
With a simple rate of 24%, you get 24% of the principal (initial amount) each year.
So, if you invest \$100; after one year you have \$124, at two years, you have \$148. (Each year you get \$24).
In compound interest, the rate applies to your total current amount.
\$100 - \$124 - \$153.76 [which is 124 + (24% of 124)] - 190.66 - \$235.42
Principal: \$100; Interest 24%
Simple: \$220.00 at five years
Compound: \$293.16 at five years

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