How To Find Average: A Step-by-Step Guide With Examples
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Knowing how to find an average can benefit you in a variety of ways. Averages are useful for summarising a large numerical set and comparing data. Based on your understanding of how to find the average of numbers, you will be able to make better business decisions. In this article, we will discuss what an average number is, how to find average and look at some examples of determining the average.
What is the average?
The average is a mathematical term used to denote the number you get when you divide the sum of a set of numbers with the total count of the numbers in the data set. When you find the average, you get the central number, and you can take that to as the representative of the entire data set. The average is also known as the mean, the median, the mode and the range. These terms are, however, not all the same.
The mean is what you usually mean when you are talking about the average. You can calculate it with the method described above. The median is the number that you get in the centre of the data set when you put it in order. The mode is the number that occurs most often in the data set. The range is the difference you get when comparing the lowest and the highest values in the data set. You may use the last three calculations less frequently than the mean. To calculate the average, keep your attention on the mean.
How to find the average
You can find the average by taking the following steps:
1. Select the data set that you want to find the average for
To calculate the average, you must know what it is that you want to get averaged. It is possible to calculate averages for a variety of things. If you run a business, you might want to know the average number of new hires your company made in the past year. You might also want to know the average number of wages you paid to your employees in one year.
Additionally, it might be necessary for you to find out about the average number of product sales you made in a year and the average number of items you ordered for your inventory in that year. After you have decided on the things you want to get averaged, you can take the next step and calculate the mean.
2. Calculate the sum of the data set
The second step in calculating the average is determining the sum of a data set. Depending on your arithmetic skills, you can do the calculation by hand, with a calculator or by using a spreadsheet. So, if the data set contains the numbers 3, 8, 5 and 10, you will need to add them together to get the sum of 26.
3. Count the numbers in your data set
The next step involves determining how many numbers are in your data set. To do this, you must count the number of values you are using. As already seen, the numbers are 3, 8, 5 and 10. This means that you have four numbers in total. If you happen to have two numbers with the same value, you will need to count them as if they were their own number.
4. Divide the sum of the data set by the total count of the numbers in the data set
Now, you will need to take the sum of the data set, which is 26, and divide it by the total of the data set numbers of values, which is 4. Now if you divide 26 by 4, you get 6.5. So, 6.5 is the average of the data set.
Why should you calculate the average?
There are plenty of reasons why you might want to determine the average. By calculating it, you will find it possible to make sense of a large set of numbers. Instead of trying to go through the entire data set to figure out its implication, you only have to find one number and use it for summarising the whole set of numbers. When you find the averages of different data sets, it becomes easier to compare them and get important information that you might need for your business.
Related: 10 Valuable Data Analysis Skills
When to use the average
You can use the average in different personal and professional scenarios. It can help when you want to find a single number to represent the value of a large data set. For business purposes, knowing the average can help you to find the following:
The average number of customers you had in a given period.
The average number of sales you had in a particular period.
The average number of sales you had for a specific product in a given period.
The average number of employees you had in a given period.
The average number of wages you paid to your employees in a given period.
The average number of business expenses you had in a given period.
The average number of months in which your business made a profit.
Example of calculating the average
It is easier to understand what the average means and how you can calculate it when you look at an example:
Finding the average sales
Let us assume that you own a clothing store, and you want to determine the average amount of sales in a single year for a new pair of ripped denim jeans. For this, you decide to use the number of sales each month to help you calculate the average. Since there are 12 months in one year, you will work with 12 numbers. Let us assume that you sold the following number of ripped denim jeans from January to December: 20, 35, 49, 62, 70, 30, 28, 83, 48, 31, 57 and 98.
To calculate the average of these sales, you must add together the numbers of ripped denim jeans you sold every month and divide the number you will get by 12. So, when you add together the numbers of ripped denim jeans that you sold every month, you will get the number 611. Now, you can divide 611 by 12 to get 50.91. So, the average number of sales you made in a given year on a particular pair of denim jeans is 50.91.
How to use a spreadsheet to calculate the average percentage
It is simpler and quicker to do your calculations about averages on a calculator. However, for various work and business-related reasons, you might need to know how to calculate the average percentage on a spreadsheet too. It is a simple process whether you are using Excel, Google Sheets or LibreOffice Calc. To calculate the average percentage using a spreadsheet, you can follow these steps:
Open a new spreadsheet and type in the data that you want to get averaged in column A. If you have six numbers that you want to calculate the average percentage of, you can enter them in the spreadsheet cells from A1 to A6. For example, enter 41, 32, 45, 24, 65 and 77 in cells A1, A2, A3, A4, A5 and A6, respectively.
You can write the formula =AVERAGE(A1:A6) in the cell right below A6, that is in A7.
You will get the average, which, in this case, is 47.33.
Can averages be misleading?
Averages can be misleading sometimes, and there can be various reasons for that. You might have outliers in your data set. Outliers are the data points that you often find scattered away from the clusters around a line or an area on graphs. Only a few outliers are sufficient to skew the data set's average, draw data points away towards them and misrepresent where the data points actually cluster. You should also not make the mistake of thinking that averages are typical or perfect representations of their data set.
Such erroneous thinking might lead you to overlook the nuances of the data and make assumptions, rationalisations or over-simplifications that have little or no basis in real life. When you want to apply averages, you can only do so for the same type of groups that have the same kind of categorisation. Averages can also be misleading if you apply the average of a group to an individual scenario. It will not work and you will not be successful in using the data to predict or describe behaviours. The results you get will be inaccurate.
Please note that none of the companies mentioned in this article are affiliated with Indeed.
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