difference between average and weighted average
When most people think of average, they are thinking of what’s called the arithmetic mean. The arithmetic mean is about adding up all of the numbers first. And then, you are dividing by how many numbers there are. However, using the arithmetic mean can produce misleading results in cases where some numbers are much more important. This is where WA comes in and you should learn difference between average and weighted average!
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average vs weighted average: difference between average and weighted average
Weighted average definition means it takes into account not just the quantity of data points. But also their relative importance. For example, you are running a company with 100 employees. If 10 employees quit in one month, that would have a much bigger impact on your workforce. When we compare it 1 employee quits in 10 months. In this case, it would make more sense to weigh those 10 employees’ departures more heavily. So, when calculating the average number of employees quitting each month, you should take difference between average and weighted average.
Because weighted averages give a more accurate results by taking into account these fluctuations.
what does a weighted average mean: average vs weighted average
When it comes to averages, weighted averages are almost always going to be better than simple arithmetic means.
What is an average?
It is basically the sum of all values and they are divided by the overall number. There are different averages and different ways for finding them tough. But the most common type is the arithmetic mean. The arithmetic mean is what people generally think of when they hear the word average. If you wanna calculate the arithmetic mean, you will simply add up all of the numbers and divide by how many numbers there are. For example, let’s say you have the following data:
1, 2, 3, 4, 5
The arithmetic mean would be (1+2+3+4+5)/5= 3.
Weighted average definition take into account not just the quantity of data points. But also their importance.
What is a weighted average? weighted average definition
A WA is an average that gives more importance or weight to some values than others. You can assign numbers to each value in case you have other criteria. For example, you can weight data points based on their recency. Or you can give different weight percents for how important they are to process.
To calculate a WA, you need two things at hand and then you can start.
- 1) a set of data
- 2) and your weights.
The weights can be anything you want but they add up to 1.0 (100%) in total. For example, let’s say you have the following data:
1, 2, 3, 4, 5
And you want to weigh the data points as follows.
- Recent data: 0.4
- Accurate data: 0.3
- Important data: 0.3
The WA e would be (1*0.4)+(2*0.3)+(3*0.3)+(4*0.4)+(5*0.3)/5= 3.2. As you can see, the weighted average is a bit different from arithmetic mean. This is why we gave more importance to certain values in above calculation.
When should you use a WA?
WA are useful when you want to give highlight certain values. For example, you want to give more weight to recent data points. Because they are more accurate than past ones. Or, you might give more weight to important data points for current status.
There are many different ways you can weight data. So, it is important to think about which weights make most importance in that specific analysis.
What are the benefits of using It?
Weighted averages come with advantages over arithmetic means. You can see some of them below.
1. They’re more flexible because you can give more or less importance to different values.
2. WA are often more accurate than arithmetic means. Because they consider the relative importance of some cells.
3. WA are often easier to reach overall analysis than arithmetic means. Because they give you a better view for bigger picture.
What are the drawbacks of using a weighted average?
Weighted averages also have some disadvantages tough. And especially if you are new to excel, you may afraid of using them.
1. Because they are a bit difficult to calculate. Since you cannot calculate weighted averages manually, especially if you have a lot of data points, you should learn formulas.
2. Weighted averages can be difficult to understand if you do not know how they work.
3. If you are not careful, weighted averages can be biased towards certain values.
How to calculate a weighted average in Excel
Calculating a weighted average in Excel is easy if you follow below steps.
1. So as always, you should enter your data into Excel.
2. In the cell next to each data point, you should enter the weight you want to use for that data point.
3. For the result cell, you will write following formula: =AVERAGE(B1:B5)*C1/SUM(C1:C5).
4. And voila, you can press Enter to see the WA.
Weighted averages can be necessary many different situations. If you have data that you need to weigh, Excel is a great for doing it. But you should look at importance and if they make sense at total picture.
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