Among all the methods of measuring seasonal variation, link relatives method is the most difficult one. When this method is adopted the following steps are taken to calculate the seasonal variation indices :
(i) Calculate the link relatives of the seasonal figures. Link relatives are calculated by dividing the figure of each season* by the figure of immediately preceding season and multiplying it by 100.

These percentages are called link relatives since they link each month (or quarter or other time period) to the preceding one.
(ii) Calculating the average of the link relatives for each season. While calculating average we might take arithmetic average but median is probably better. The arithmetic average would give undue weight to extreme cases which were not primarily due to seasonal influences.
(iii) Convert these averages into chain relatives on the base of the first season.
(iv) Calculate the chain relatives of the first season on the basis of the last season. There will be some difference between the chain relative of the first season and the chain relative calculated by the previous method. This difference will be due to long-term changes. It is therefore necessary to correct these chain relatives.

Try yourself:
What is the purpose of calculating link relatives in the link relatives method of measuring seasonal variation?

(v) For correction, the chain relative of the first season calculated by first method is deducted from the chain relative (of the first season) calculated by the second method. The difference is divided by the number of seasons. The resulting figure multiplied by 1,2,3 (and so on) is deducted respectively from the chain relatives of the 2nd, 3rd, 4th (and so on) seasons. These are correct chain relatives.
(vi) Express the corrected chain relatives as percentage of their averages. These provide the required seasonal indices by the method of link relatives. The following example will illustrate the process.

The correction factor is calculated as follows :
Chain relative of the first quarter (on the basis of first quarter) = 100
Chain relative of the first quarter (on the basis of first quarter) =
Difference between these chain relatives = 106.7 – 100 = 6.7
Difference per quarter =
Adjusted chain relatives are obtained by subtracting 1 × 1.675, 2 × 1.675, 3 × 1.675 from the chain relatives of 2nd , 3rd and 4th quarters, respectively.

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FAQs on Link Relatives Method, Business Mathematics and Statistics - Business Mathematics and Statistics - B Com

 1. What is the Link Relatives Method in Business Mathematics and Statistics?
Ans. The Link Relatives Method is a statistical technique that is used to analyze the relationship between two variables. It is commonly used in business mathematics to find the correlation between two sets of data. The method involves calculating the percentage change in one variable in relation to the percentage change in another variable.
 2. How is the Link Relatives Method useful in Business Mathematics and Statistics?
Ans. The Link Relatives Method is useful in Business Mathematics and Statistics as it helps to identify the strength and direction of the relationship between two variables. This method can be used to forecast future trends based on historical data and to identify the impact of changes in one variable on another variable. It is also used to identify outliers and to check the validity of assumptions made about the data.
 3. What are the steps involved in using the Link Relatives Method?
Ans. The steps involved in using the Link Relatives Method are as follows: 1. Determine the two variables that you want to analyze. 2. Collect data for both variables. 3. Calculate the percentage change in each variable. 4. Divide the percentage change in one variable by the percentage change in the other variable. 5. Multiply the result by 100 to get the relative change as a percentage. 6. Analyze the result to determine the strength and direction of the relationship between the two variables.
 4. Can the Link Relatives Method be used for more than two variables?
Ans. No, the Link Relatives Method is designed to analyze the relationship between two variables only. If you want to analyze the relationship between more than two variables, you will need to use a different statistical method such as multiple regression.
 5. What are some common applications of the Link Relatives Method in Business Mathematics and Statistics?
Ans. The Link Relatives Method is commonly used in business mathematics and statistics for a variety of applications, including: 1. Forecasting future trends based on historical data. 2. Identifying the impact of changes in one variable on another variable. 3. Analyzing the strength and direction of the relationship between two variables. 4. Checking the validity of assumptions made about the data. 5. Identifying outliers in the data.

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