Objectives of averaging, Financial Management

Assignment Help:

The two main objectives are:

  1. To get at a single value: Measures of central value, by considering the mass of data in one single value, enable us to get a bird's-eye view of the entire data. Thus one value can represent thousands, lakh and even millions of values. For example, it is impossible and is hardly of any use to remember the incomes of individual companies in a particular industry. But if the average income is obtained by dividing the total income by the number of companies, we get one single value that represents the entire industry.

  2. To facilitate comparison: Reducing the mass of data to one single figure facilitates comparisons. Comparison can be made either at a point of time or over a period of time. For example, we can compare the average annual profits of different industries for a particular year, say, 20x3-x4 and thereby conclude which industry is the best or we can compare the growth percentage in sales of a particular industry for different time periods and thereby conclude as to whether the results are improving or deteriorating. Such comparisons are of immense help in framing suitable and timely policies.


Related Discussions:- Objectives of averaging

What is the maximum additional short-term funding, B.J. Industries has a cu...

B.J. Industries has a current ratio of 2.5, with $2.5 million in current assets.  Due to sales growth, the company wants to expand accounts receivable and inventories by

The safety margin, Norfolk Ltd is specialized in producing & selling air co...

Norfolk Ltd is specialized in producing & selling air conditions.  In 2010, the manufacturing cost per unit included:

the use of a preauthorized check system, In general, what type of firm wou...

In general, what type of firm would benefit from the use of a preauthorized check system and what specific types of companies have successfully used this device to accelerate cash

Futures contract, Futures Contract It is an obligation to purchase or s...

Futures Contract It is an obligation to purchase or sell an asset at an agreed-upon price on an exact future date. The buyer commits himself or herself to buy the asset, and th

Cash vs. accrual accounting, Cash vs. Accrual Accounting: While it is b...

Cash vs. Accrual Accounting: While it is beyond the scope of this module to assess accounting systems against all types of accounting styles, it is important that managers unde

Define the matching principle of working capital financing, What is the mat...

What is the matching principle of working capital financing?  What are the advantages of following this principle? The matching principle is while short-term financing is employe

Define hedger - market participants, Define Hedger - Market Participants ...

Define Hedger - Market Participants A hedger desires to prevent price variation by locking in a purchase price of the underlying asset by a long position in a futures contract

Sources of return, When an investor invests in fixed income sec...

When an investor invests in fixed income securities, he receives returns from one or more of the following sources: Coupon Interest payment.

Nature of current liabilities, Current Liabilities: A liability is an ...

Current Liabilities: A liability is an obligation to convey assets or do services at some future date. For purposes of balance sheet analysis, it is important to create a dist

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd