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What does weight show in weighted average profit?

Answer and explanation

Correct answer: How much importance is to be given to a year

In a weighted average profit calculation, each year’s profit is not always treated as equally important. A weight is a number assigned to show the importance given to that year. A larger weight means that the year’s profit will influence the final average more strongly. Therefore, option A is correct.

To calculate the weighted average, each year’s profit is multiplied by its weight. The products are then added and the total is divided by the sum of the weights: weighted average = total of weighted profits ÷ total weights. For example, if a recent year is given weight 3 and an older year weight 1, the recent year affects the result three times as much. Weight does not represent cash, loan, or unsold goods.

Related tags

GoodwillWeighted AverageWeights

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