CAGR is the steady yearly rate that would take an investment from its beginning value to its ending value over the period: CAGR = (ending / beginning)1/years - 1. An investment that grows from 10,000 to 18,000 in 5 years has a CAGR of about 12.5%. It smooths out ups and downs, so it is useful for comparing funds, revenue, users or any figure that compounds. It is not a forecast and it does not show the volatility along the way.
Yes. If the ending value is lower than the beginning value the result is a negative rate, meaning an average yearly decline.
No. The simple average of yearly returns ignores compounding and is usually higher than CAGR when returns vary.
See also: compound interest calculator · ROI calculator · percent change calculator