# Answer on Statistics and Probability Question for Sweety Kalra

Question #167

What are the forumulas to calculate the index number?

Expert's answer

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.

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.

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