We talk about indexes in more detail and from a practical point of view.
First, I will quote an already existing one-minute video.
We study the simplest ways to analyze the situation at the enterprise using the index method.
In a general sense, this concept can have several meanings.
See What is "index"
Let's see how this can be applied in practice.
Case study: "The gross profit of the enterprise decreased from 85 to 36 dollars."
We start to understand: "Why?".
The difference was as much as forty-nine dollars.
Let's determine the cause of the fall. Of course, let's start with sales.
In April we sold 18 pieces at ten dollars, in March we sold 17 pieces at 12. The difference was 24 dollars.
Let's take a look at the cost.
Yes, our cost has gone up.
Let's recalculate what it cost us: 8 * 18 and 7 * 17. The difference was +25 dollars.
And the point here is this - we are interested in what factors influenced this and what is the role of each.
"Which problem to deal with in the first place?"
Therefore, at the first stage, first through indices, and then through percentages, we will express the role of each indicator.
That is, if we take a separate line, it is completely clear to us how seriously this or that indicator has changed.
Actually, this is what indexes are for.
But if we look at the table "as a whole" - somehow we have not increased clarity. Do you agree?
The point is this - the factors of price, sales volume and cost act simultaneously, but - to varying degrees.
And what to do?
The solution here is pretty simple.
Imagine that you have a switchboard in front of you. And you need to understand which switch does what.
What will you do? You will sequentially turn on and off each switch in turn!
We will now do exactly the same thing.
To begin with, let's take only two factors - price and sales volume.
Let's ask the question: "What would happen if only the price changed?".
That is, we leave all the indicators for March, and we already take a new price.
Due to the fall in prices, our loss was $34 - very clear.
We are doing the same "trick" with the volume of sales.
As you can see, the increase in sales gave us a plus of $12.
Do you notice anything strange?
If we add up the influence of each of the factors we have taken into account, the resulting value will not be equal to the drop in revenue at all!
The missing figure is the result of the joint influence of the changed indicators.
We just have to deal with the cost.
It would seem that this is one factor. But no.
We have changed the cost of not only the unit of products sold, but, as a result of a change in sales volume, the total amount of costs has also changed.
Therefore, when calculating the influence of each factor, we act in exactly the same way.
Well, here, without the combined influence of factors, it was not done.
Let's look at the final table.
We have decomposed the influence of each factor in relative value and in absolute value.
Now, you can clearly see which factor and how much influenced the change in the situation.
