1. What is the Compound Index?

The Compound Index (also known as Composite Index) is a weighted average of multiple individual indices that provides an overall measure of performance across different components or criteria.

2. How Does the Calculator Work?

The calculator uses the composite index formula:

Where:

• \( w_i \) — Weight of each component (must sum to 1.0)
• \( \text{Index}_i \) — Individual index value for each component (%)
• \( \sum \) — Summation across all components

Explanation: Each component's contribution to the overall index is proportional to its assigned weight, allowing for customized importance levels across different metrics.

3. Importance of Composite Index Calculation

Details: Composite indices are widely used in business performance measurement, economic indicators, academic grading systems, and multi-criteria decision analysis to provide a single comprehensive score from multiple variables.

4. Using the Calculator

Tips: Enter index values as percentages (%), and weights as decimal values between 0 and 1. The sum of all weights must equal exactly 1.0 for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: Why must weights sum to 1.0?
A: This ensures that the composite index represents a proper weighted average and maintains consistent scaling across different applications.

Q2: Can I add more than 3 components?
A: This calculator handles 3 components. For more components, you would need to extend the formula accordingly while maintaining the weight sum constraint.

Q3: What are typical applications of composite indices?
A: Performance scorecards, economic indicators (CPI, HDI), academic grading, investment portfolio analysis, and multi-criteria decision making.

Q4: How should weights be determined?
A: Weights should reflect the relative importance of each component based on expert judgment, statistical analysis, or organizational priorities.

Q5: Can negative index values be used?
A: Yes, the formula supports negative index values, though the interpretation would depend on the specific context and measurement scale.