Quantitative
Weighted average
An average where each part counts in proportion to its size.
Last reviewedWhat does Weighted average mean?
A weighted average multiplies each value by its share of the total and adds the results. If 60% of sales earn a 30% margin and 40% earn a 20% margin, the blended margin is 0.6 × 30 + 0.4 × 20 = 26%, not the simple average of 25%. Use it whenever the parts are different sizes.
Where does it come up in case interview prep?
- Chart traps that catch candidatesLesson in Charts and data in depth
- Offers, choosing between them, and rejectionLesson in Final rounds and offers
- Insurance unit economics: the combined ratio at workLesson in Insurance: life, property and casualty, and health
- Asset and wealth unit economics: fee rates, mix, and the AUM bridgeLesson in Asset and wealth management
- The economics of a consulting firm: hours, rates, realization and pricingLesson in Professional services: consulting, audit, law and IT services
Related terms
- MarginProfit on a sale, as an amount per unit or as a percent of price.
- Market shareOur sales as a share of total market sales.
- ExhibitA chart or table the interviewer hands you to reason from.
- Percent versus percentage pointsA change in a rate is measured in points; its relative change in percent.
- CAGR (compound annual growth rate)The steady yearly growth rate that links a start value to an end value.
- Rule of 72Years to double is about 72 divided by the growth rate.
- Lakh and croreIndian number units: 1 lakh = 100,000 and 1 crore = 10 million.
- Run rateCurrent performance scaled up to a full year.