Weighted harmonic mean, Applied Statistics

Weighted Harmonic Mean

Weighted Harmonic Mean is calculated with the help of the following formula:

WHM


2303_weighted harmonic mean.png

Case 1

 

 

Consider a company consisting of only two divisions A and B. The calculation of the net profit margin for the two divisions as well as for the company as a whole is shown below:

 

Division A

Division B

Whole company
(A + B)


Net profits  (Rs. crore)

6

1

7

Sales (Rs. crore)

40

40

80

Net profit margin

15%

2.5%

8.75%                                          


Here we see that the net profit margin for the company as a whole is 8.75% which is nothing but the Simple Arithmetic Mean of the net profit margins of the two divisions A and B.

722_weighted harmonic mean1.png

So the simple arithmetic mean has a significance here. Note that the net profit margins of the two divisions A and B have been calculated with the same denominator (Sales = Rs.40 crore). In general, we can say that the appropriate mean for a set of ratios which have been calculated with the same denominators is the simple arithmetic mean.

 


 

 

 

 

Posted Date: 9/14/2012 2:44:31 AM | Location : United States







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