CAGR vs IRR

This question tests whether you can distinguish between a simple growth metric and a true return metric, a distinction that comes up often in valuation and corporate finance interviews. CAGR is based on beginning and ending values over a time period, while IRR is built around the timing and size of actual cash flows, so the candidate needs to understand what each measure captures and what it leaves out. Interviewers ask this because bankers need to know when a clean summary statistic is appropriate and when a more detailed return calculation is needed to evaluate an investment or compare opportunities.