Indexing

Welcome to today’s class!!

We are thrilled to have you in our class!!

In today’s Store Management class, we will be learning about Indexing

Indexing

indexing

Indexing is the process of organizing data according to a specific plan or framework. The indexing of data can have a variety of different uses in finance and economics, and it typically involves using a common point of reference or benchmark for the purposes of comparison.

An index establishes parameters for the data, as well as a time frame for the comparison. Over time, it allows businesspeople and economists to observe a variety of different trends and better understand the relevance of the data. Indexes can also calculate the relative value of an economic concept, such as a nation’s currency.

Some indexes allow for the comparison of data, even if the magnitude of that data varies greatly. 

index

For example, if you want to compare data between a city with eight million people and a city with one million people, an index can help you account for the differences in scale between the two cities. By creating an index, you can determine which city is experiencing the most growth over time.

Indexing also helps track economic trends, allowing for more informed decision-making. The Consumer Price Index (CPI) is an example of an index that tracks the relative value of money.

The relative value of a certain dollar amount is likely to change over time due to inflation, as witnessed in Nigeria. 

As the cost of goods rises, what you can purchase with that dollar amount is likely to decrease. The CPI can inform economists whether inflation is rising and allow them to assess the latest consumer trends more easily.

The CPI can also help economists measure the relative increase or decrease in real wages or the amount a person earns after adjusting for inflation. This type of index can also make it easier to track employee raises to determine the ideal size of a raise.

Some companies use the CPI to ensure that the relative value of their employees’ salaries remains constant.

Have you heard of the Labour Union? These people advocate for how well workers in the country should be treated. So, when unions negotiate contracts, they also use the CPI to request an annual cost-of-living wage adjustment as part of their contract.

In summary, each index allows investors to evaluate the current performances of some of the largest companies and compare them to their past performances. Investors are able to evaluate past trends because the statistical measures for each index remain constant.

 

Evaluation

What is an Index?

 

Reading Assignment

What is the full meaning of CPI?

 

Weekend Assignment

Explain three purposes of an Index.

 

We hope you enjoyed today’s class. In our next class, we will be talking about the Purchase Order

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