Using percentages incorrectly

[pingu393]

0000 said:

Quite normal in software development to hear people say 80% of the work takes 20% of the time. Features and time have a non-linear relationship.

That's because Pareto was 100% right .

[Tony2or4]

SidJames said:

I train managers how to interpret performance data, and one example I start off with is :

"If you were on £75 a day, what % pay rise would you want to be on £100 a day"

I've lost count of those that only want to be on £93.75 a day.

In the discussion about percentage profit only half a dozen or so postings back, it appeared that the business world calculates profit as a percentage of selling price instead of cost price.

Just to check that I'm following this, are you saying that your trainee managers, having got the hang of that idea, are then applying the same principal - but inappropriately - to the case of pay increases, thereby giving 25% as their answer instead of 331/3%?


As I mentioned before:

Tony2or4 said:

Just shows that I know sod all about business.

[FredClogs]

Tony2or4 said:

SidJames said:

I train managers how to interpret performance data, and one example I start off with is :

"If you were on £75 a day, what % pay rise would you want to be on £100 a day"

I've lost count of those that only want to be on £93.75 a day.

In the discussion about percentage profit only half a dozen or so postings back, it appeared that the business world calculates profit as a percentage of selling price instead of cost price.

Just to check that I'm following this, are you saying that your trainee managers, having got the hang of that idea, are then applying the same principal - but inappropriately - to the case of pay increases, thereby giving 25% as their answer instead of 331/3%?


As I mentioned before:

Tony2or4 said:

Just shows that I know sod all about business.

The real engineering answer is that it's not possible without error. Now where's the tea and biscuits.

The management answer should be "£100 a day, that's more than I get paid! - Get lost"

[strudel]

Perfectly possible to express it without error, you just use fractions



The main problem with percentages is that people don't understand the difference between relative and absolute values.

[TheInternet]

FredClogs said:

The real engineering answer is that it's not possible without error.

Would a proper engineer not be more familiar with mathematical notation?

[Tony2or4]

strudel said:

The main problem with percentages is that people don't understand the difference between relative and absolute values.

I don't think that's the main problem.

The problem is more to do with confusion over what exactly we've got a percentage of - such as in the current discussion, where you could be referring to a percentage either of the original or of the increased amount.

[xRIEx]

Tony2or4 said:

strudel said:

The main problem with percentages is that people don't understand the difference between relative and absolute values.

I don't think that's the main problem.

The problem is more to do with confusion over what exactly we've got a percentage of - such as in the current discussion, where you could be referring to a percentage either of the original or of the increased amount.

The accepted convention (to wit: what I do) regarding expressing a change as a percentage, is to take the original value (or latest value before the change in question, if we're discussing a chain of changes) and apply the percentage calculation to arrive at the altered value.

The discussion earlier around profit percentage and profit margin is they're both viable measures that would be used in different situations, it's just that profit margin is by far the better known measure (for one thing, not all businesses sell goods, so don't have stock or unit costs to measure against profit, their costs are fixed for the most part).

I suppose it's feasible to refer to the original value as a percentage of the updated value, but the wording around it would have to be very specific.

Edited by xRIEx on Tuesday 5th August 11:44

[FredClogs]

TheInternet said:

FredClogs said:

The real engineering answer is that it's not possible without error.

Would a proper engineer not be more familiar with mathematical notation?

Have you ever seen a payslip saying £99.9' ?

Reminds me I must watch Superman 2 again.

[xRIEx]

FredClogs said:

Have you ever seen a payslip saying £99.9' ?

Torque?

(IANAE)

[TheInternet]

FredClogs said:

Have you ever seen a payslip saying £99.9' ?

Thanksfully, no. Not sure what payslips have to do with anything though.

xRIEx said:

Torque?

[FredClogs]

xRIEx said:

FredClogs said:

Have you ever seen a payslip saying £99.9' ?

Torque?

(IANAE)

Recurring torque, much like this forum...

[mph1977]

Tony2or4 said:

amancalledrob said:

Thanks chaps for an excellent demonstration of the problem I face on a daily basis

Yes, but you still haven't shown us the calculation which ends with "Therefore the percentage increase is 15%".

the undiscounted premium is 200

100/200 = .5

130/200 = .65

100 to 130 of 200 is 15 % (.5 to .65)

[xRIEx]

mph1977 said:

Tony2or4 said:

amancalledrob said:

Thanks chaps for an excellent demonstration of the problem I face on a daily basis

Yes, but you still haven't shown us the calculation which ends with "Therefore the percentage increase is 15%".

the undiscounted premium is 200

100/200 = .5

130/200 = .65

100 to 130 of 200 is 15 % (.5 to .65)

The previous discount was 50%; the new discount is 35%.

15%/50% = a reduction in the no claims discount of 30%.

This can also be expressed as:
0.15/0.5 = 0.3

So it's still a 30% change. Taking percentages of percentages is a dangerous tactic and where the confusion comes about.

Just like was said here:

sbird said:

For a long time it annoyed me when I heard this sort of twaddle on the news: "Interest rates have gone up 1%."

Except they haven't. They've gone up 1 percentage point. Going from 4% to 5% is a 25% increase.

Edited by xRIEx on Tuesday 5th August 12:53

[TwigtheWonderkid]

FredClogs said:

cobra kid said:

"I bought it for £1, sold it for £2. I made 100% profit"....gggggrrrrrrrrrr

£1 = 100 pennies = 100%

What's wrong with that?

Because if you buy for £1 and sell for £2, then you have not made 100% profit. You charged 100% mark up, and 50% of your sales price was profit. If you got it for nothing and sold for any sum of money at all, then you've made 100% profit.

[TwigtheWonderkid]

xRIEx said:

sbird said:

For a long time it annoyed me when I heard this sort of twaddle on the news: "Interest rates have gone up 1%."

Except they haven't. They've gone up 1 percentage point. Going from 4% to 5% is a 25% increase.

Seeing as a rate is expressed in percent it's not wrong.

It is wrong. The rate has moved from 4% to 5%. That's fine. The rate has increased by 1 percentage point is also fine. But to say the interest rates have increased by 1% is wrong. If they go from 4 to 5 that's a 25% increase, as sbird rightly says.

If you were paying £100 on a 4% rate loan, you'll be paying £125 for a 5% rate loan. That's 25% of anyone's money.

Edited by TwigtheWonderkid on Tuesday 5th August 13:18

[FredClogs]

TwigtheWonderkid said:

FredClogs said:

cobra kid said:

"I bought it for £1, sold it for £2. I made 100% profit"....gggggrrrrrrrrrr

£1 = 100 pennies = 100%

What's wrong with that?

Because if you buy for £1 and sell for £2, then you have not made 100% profit. You charged 100% mark up, and 50% of your sales price was profit. If you got it for nothing and sold for any sum of money at all, then you've made 100% profit.

You're an accountant aren't you?

Most people would say I've double my money, that's 100% profit, most people may be wrong, but in this case I'm with the populace.

Like wise if I bought something for £1 and sold it for £1.16 most people would say that's 16% profit, not 13.79% profit. I don't care what the accountants may say, they may be right but I'm sure I'm not wrong.

But this isn't a question of incorrect use of % it's a question of how you describe a profit.

[xRIEx]

TwigtheWonderkid said:

FredClogs said:

cobra kid said:

"I bought it for £1, sold it for £2. I made 100% profit"....gggggrrrrrrrrrr

£1 = 100 pennies = 100%

What's wrong with that?

Because if you buy for £1 and sell for £2, then you have not made 100% profit. You charged 100% mark up, and 50% of your sales price was profit. If you got it for nothing and sold for any sum of money at all, then you've made 100% profit.

Both are valid http://en.wikipedia.org/wiki/Profit_margin

If you change the scenario slightly so you invest say, £1 in stock which is then sold yielding you £2, your return on investment is 100%.

[xRIEx]

TwigtheWonderkid said:

xRIEx said:

sbird said:

For a long time it annoyed me when I heard this sort of twaddle on the news: "Interest rates have gone up 1%."

Except they haven't. They've gone up 1 percentage point. Going from 4% to 5% is a 25% increase.

Seeing as a rate is expressed in percent it's not wrong.

It is wrong. The rate has moved from 4% to 5%. That's fine. The rate has increased by 1 percentage point is also fine. But to say the interest rates have increased by 1% is wrong. If they go from 4 to 5 that's a 25% increase, as sbird rightly says.

If you were paying £100 on a 4% rate loan, you'll be paying £125 for a 5% rate loan. That's 25% of anyone's money.

Edited by TwigtheWonderkid on Tuesday 5th August 13:18

Yes, exactly as I said in a post a couple above yours.

The language used when a rate is stated is important (at least, a clear definition is important), and when it is ambiguous ("interest rates have increased x%") then confusion and errors can result.

[TwigtheWonderkid]

FredClogs said:

You're an accountant aren't you?

Most people would say I've double my money, that's 100% profit, most people may be wrong, but in this case I'm with the populace.

Like wise if I bought something for £1 and sold it for £1.16 most people would say that's 16% profit, not 13.79% profit. I don't care what the accountants may say, they may be right but I'm sure I'm not wrong.

But this isn't a question of incorrect use of % it's a question of how you describe a profit.

I'm not an accountant, but I have an understanding of turnover, gross and net profit.

In general terms, profit is expressed as a percentage of the sales price, after deduction of cost price and any other costs (labour/rent/etc.)

Buying for a pound and selling for £1.16 is indeed 13.79% profit, assuming you had no other expenses to factor in.

[xRIEx]

FredClogs said:

TwigtheWonderkid said:

FredClogs said:

cobra kid said:

"I bought it for £1, sold it for £2. I made 100% profit"....gggggrrrrrrrrrr

£1 = 100 pennies = 100%

What's wrong with that?

Because if you buy for £1 and sell for £2, then you have not made 100% profit. You charged 100% mark up, and 50% of your sales price was profit. If you got it for nothing and sold for any sum of money at all, then you've made 100% profit.

You're an accountant aren't you?

Most people would say I've double my money, that's 100% profit, most people may be wrong, but in this case I'm with the populace.

Like wise if I bought something for £1 and sold it for £1.16 most people would say that's 16% profit, not 13.79% profit. I don't care what the accountants may say, they may be right but I'm sure I'm not wrong.

But this isn't a question of incorrect use of % it's a question of how you describe a profit.

Profit percentage is 16%.

Profit margin is 13.79%.