Indexing

jane

Question to all those boffins on indexing

If year 2001 = 100.0
and 2002 = 103.5
and 2003 = 107.4
and 2004 = 110.6

And I had to calculate the indexed value of annual turnover in year 2002 terms

would I calulate 2002 annual turnover figure x 103.5/103.5 to give me the index adjusted turnover, and then for 2003 the ann turnover fig x 103.5/107.4 and so on?

Any help would be appreciated

Thanks

uknitty

Hi there

I really struggled with index numbers for a while !

What you are seeking to do is express all of the figures in terms of how they were at a particular period of time in order that they can be compared on a like to like basis.

If in the example below you wanted to express all of the sales in terms of 2001 sales, 2001 would be your "base year". The index figure for the base year always goes on the bottom of the fraction (hence the "base")

The top half of the fraction is the year that you want to adjust. So to express turnover in terms of 2001 rates in the example you gave....

2001 = 100.0/100.0 * Turnover
2002 = 103.5/100.0 * Turnover
2003 = 107.4/100.0 * Turnover
2004 = 110.6/100.0 * Turnover

You could also work it the other way around i.e. express the historical data in terms of 2004's figures for that you would have

2001 = 100.0/110.6 * Turnover
2002 = 103.5/110.6 * Turnover
2003 = 107.4/110.6 * Turnover
2004 = 110.6/110.6 * Turnover

If you wanted to do 2002 you would put 103.5 on the bottom and so on - you get the picture

So yeah, the question will always ask you to express something in terms of X year. Thats your base year. Stick that on the bottom of the fraction and the year you want to convert on the top and you are sorted.

Hope that makes sense.....

jane

Ah thanks Unkitty, yes that does make a bit more sense. Many thanks for taking the time to reply. Things always seem a bit more clearer when someone else explains

jane

Doh sorry make that Uknitty !