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a.
To compute: Ratio of each year’s data with previous year’s data.
Introduction: All ratios shall be calculated by formula:
Ratio measures the change in data from a base value of 1.
b.
To compute: Growth of figures relative to last year.
Introduction: Since ratios are measuring change in base value of 1 from one year to next, growth rate can be calculated by subtracting 1 and multiplying the result by 100 to get growth in percentage terms.
c.
To compute: Arithmetic mean of growth for each item.
Introduction: Average function in excel will calculate the arithmetic mean of growth over the given period by dividing the sum of growth percentage by number of observations, that is, 4.
d.
To compute: Geometric mean of growth for each item.
Introduction: Geometric mean considers the impact of compounding, that is, change in base value due to impact of previous year’s growth.
e.
To state: Difference between arithmetic mean and geometric mean and possibility of geometric mean being greater than arithmetic mean.
Introduction: Arithmetic mean is derived by dividing the sum of observations by number of observations, on the other hand geometric mean is derived as the product of observations rooted by number of observations.
f.
To Compare:Results for geometric average and arithmetic average for given variables.
Introduction: Arithmetic mean is derived by dividing the sum of observations by number of observations, on the other hand geometric mean is derived as the product of observations rooted by number of observations.
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Chapter 1 Solutions
EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI
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