R & R - Indices

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:32AM in AAT student discussion
Can somebody please explain to me what idices are used for and how they are used. I had a question in my skills test and am stumped. I've looked at my books and not really any the wiser. The question itself involves sales if that is relevant. :?: :?: :?: :?:

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:R & R - Indices

    Can you remember the question at all? Just wondering in what context it was referred to.....
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:R & R - Indices

    There was something in the AAT magazine about indices. It explained things quite well (I thought so, but then I am only just starting Intermediate lol!)

    HTH
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:R & R - Indices

    Hi Guys,

    hope this helps,

    Indices are used to show relative figures over different periods in a true relationship. A base year is considered and used and then values for years prior to the base year and after can be truly analysed - to ascertain whether sales (in this case) are growing or whether they are actually falling.

    You can move the base year around - dependent on the information which the company is looking for - which to means, in theory the figures could always be open to speculation. As my husband says 'statistics are like a bikini - what they show is interesting - but what they hide is even more so!'

    The indexation of years takes out the inflation component of time periods. Also indices can be used to see the trend of a companes figures against the average/indices for the industry.

    You can also do time series trend analysis with indices.

    hope this helps, Ruby (wearing clothes - and not a bikini!) :lol:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:R & R - Indices

    Indices enable you to measure changes in a given piece of data.

    The most common index in daily language is the Retail Price Index details of which can be accessed on this adobe acrobat link
    http://www.statistics.gov.uk/downloads/theme_economy/CP_Brief_Guide_2004.pdf

    The index is made up of a number of items we spend our money on as consumers, those we buy more of are in the index in large quantities, those we buy fewer of are in small quantities. Then at regular intervals the cost of this collection of items is valued in total by finding the price of each item, multiplying it by the quantity and then adding up the total.

    The base year total is given a value of 100. Each year is valued in terms of the base year.
    For example if the total in the base year costs £200 then that has a value of 100. If the total cost the following year is £210 then the value is £210/£200 = 105.

    You can then see quite quickly that the items as a whole have risen in cost by 5% from 100 to 105.

    If the index value in the next year is 108 this shows a rise in prices over the two years of (108-100)/100 = 8%

    So indices are used to identify a relative change, in this example a change in cost.

    sandy.hood@chichester.ac.uk
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:R & R - Indices

    I wrote this at the same time as Ruby, but we both have said the same thing
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:R & R - Indices

    Thank you very much all of you, its a lot clearer now. Very Kind

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