Chapter 32- index numbers

Question 1

To allow for comparisons to be made what may be used?

Answer 1

Index numbers

Question 2

What do index numbers convert?

Answer 2

They convert values or numbers from different years into a ‘value’ based on once particular year (the base year)
By converting the numbers from different years into one year as a common denominator, this allows for meaningful comparisons to be made
This means’s a business can make judgments about whether there have been genuine improvements or a decline in for example sales

Question 3

What formula is used?

Answer 3

Number in year required/ number in base year x 100

Question 4

What is the base year viewed as having?

Answer 4

A value of 100

Question 5

What does seeing a percentage allow for?

Answer 5

A quick and easy comparison rather than trying to ascertain between large numbers

Question 6

If a comparison is necessary for actual sales in terms of money what would the formula be?

Answer 6

Price in year/ price in base year x 100