Average, median and why one number can mislead
People often say “average” when they want to describe what is typical. But the average can be pulled far away from typical by a few very large values.
Mean and median
The mean (usual average) adds all values and divides by how many there are. The median is the middle value when you sort them. If five bills are 100, 120, 130, 140 and 5,000, the mean is 1,098 but the median is 130. The median describes a typical bill much better here.
When the mean is fine
If values are fairly even, mean and median are close and either works. A big gap between them is a warning that a few extreme values are present.
What to do
Look at the largest and smallest values, and check whether the big ones are real (a wholesale order) or mistakes (an extra zero typed by accident). Report both numbers when they differ a lot.
Related guides
- How to clean sales data before you analyse it
- What a trend line can and cannot tell you
- How to group customers by spending
General information for learning. It is not financial, tax, legal or investment advice.