Weighted averages press heavily on us, in two versions

During my consulting career I have known only one calculation of “weighted average” (See my posts of Nov. 30, 2005 with my definition and an example; and Feb. 20, 2006 with an example from litigation.). I presumed you add up all of one figure from a set of law departments (such as numbers of lawyers in each department) and divide by all of another figure (such as company revenue). Ah, Rees, never presume, as it makes a presumptuous you-know-what of you and me.

It turns out there is a different formula to calculate weighted average and it does not reach the same result. Here is an example. To weight the ratio of lawyers per billion dollars of company revenue by revenue, multiply each company’s ratio by its revenue and add all those products. Then divide that total figure by the total of all the companies’ revenue. Excel has a built-in formula to help with the math.

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