Resolved: Why did he subtract 1from the Var %?
Why did he subtract 1from the Var %?
Hi Matthew,
Good to hear from you!
The idea is that you divide this year's value (let's say 115) by last year's value (let's say 100).
So, we have 115/100 = 1,15
However, to obtain the percentage of change, we need to subtract 1 and will get 0.15 = 15%.
In fact if this year's value was 100 and last year's value was 100, we would have:
100/100 -1 = 1 - 1 = 0% change.
Makes sense, right?
Best,
Ned
Hi!
Though of expanding on Ned's explanation above.
Let's use the same example, with this year's value as 115 and last year's value as 100.
The formula for Var % would be:
(This year - Last year) / Last year
---> (115 - 100) / 100
---> (115/100) - (100/100)
---> 1.15 - 1 = 0.15 or 15%
Looking at the breakdown/steps for the formula applied above, we can interpret the formula in this way:
-> we want to find how much difference or change happened from last year to this year
-> in other words, from our last year's value of 100, how much percentage was changed (added, in this case)
-> so we found that 15 was added
-> and so how much percentage is an increase of 15 from our last year's value (a.k.a. ratio of 15/100)
-> so we get that it's about 15%. Hence, there was a 15% increase/change.
May have stretched that a bit but hope that somehow helps.
Regards