What is weighted average and why is it used?

< 1 min read

Weighted average is an average where each value contributes proportionally based on its importance (weight).
In one project, we calculated weighted average selling price based on sales volume per product.
Instead of simple average, higher-volume products had more impact on the final result.
It provides a more realistic representation when values have different significance.
Weighted averages are commonly used in pricing, margins, and performance scoring.
For example, portfolio returns are calculated using weighted contribution of each asset.
As a BA, I use weighted averages to avoid misleading conclusions from simple averages.
Overall, it ensures calculations reflect true business impact.

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