Answer to Question #167 in Statistics and Probability for Sweety Kalra

Question

What are the forumulas to calculate the index number?

Answer 1

1. Obtain a value for the base period. For instance, the company revenue was $2,500,000 in 2005.
2. Obtain the value for another period you wish to compare to the base one. For instance, the revenue of the same company became $3,600,000 in 2008.
3. Divide the number from Step 2 by the base period value, and multiply the quotient by 100 to calculate the index number. In our example :

Index number = ($3,600,000 / $2,500,000) x 100 = 144.

Since 100 is the full amount of the base period (or 100%), subtract 100 from your answer. This indicates the revenue growth by 44 percent in comparison to the base year.