Steve's Factoids Chapters 5-7
What saying illustrates the problem with knowing precisely how much value accrues from advertising expenses to sales or the value of the firm?
" Half the money I spend on advertising is wasted; the trouble is I don ' t know which half "
If an accounts payable transaction has a z-score of 3, with a mean of $20,000 and a standard deviation of $5,000, the amount of the related party transactions are...
$35,000 (3*5 plus 20)
Which calculation would be used primarily in a horizontal analysis?
(New - Old)/Old
According to Benford's law, What is the expectation for the percentage of times that the first digit of a number is the number "1"?
30.10%
Albert Einstein's intelligence quotient (IQ) was reported to be 160. If the population mean IQ is 100 and the standard deviation is 15, Einstein would have a z-score of...
4. (4*15+100=160)
According to the textbook, U.S. businesses will lose what percent, on average, of their gross revenues to fraud, with projected losses of more than $4 trillion?
5%
According to the normal distribution, what percent of the data would fit within 1 standard deviations of the mean?
68%
According to Benford's law, what number has a lower probability of occurrence than if the first digit "5"?
9
All other things equal, in which of the following buckets would you expect the least number of aged receivables to be in?
91-120 days
According to the normal distribution, what percent of the data would fit within 2 standard deviations of the mean?
95%
Performing a bank reconciliation is example of the diagnostic analytics of...
identifying anomalies/outliers
Benford's law follows the distribution formula:
log10(1 + (1/d)), where is each digit 1, 2, and so on.
The __________ (more or less) recent the accounts receivable (i.e., shorter amount of time it has been outstanding), the more likely it will be that they will ultimately be collected?
more
Descriptive analysis is __________ the first type of data analytics performed.
often or usually (but not always)
What is a characteristic of a population?
parameter
A z-score tells us how many__________, a data point (or observation), xi, is from its population mean, μ
standard deviations
Descriptive analytics are characterized by __________ of the relevant data.
summarization
Commitment to prior investments escalates and makes it harder to abandon prior investments even if it may not make rational sense is called...
sunk cost fallacy
A correlation is used to understand...
the extent to which variables are related to each other.
A histogram is used to understand...
the frequency of the data using a display of rectangles with area proportional to the underlying frequency of the data.
A t-test is used to understand...
the probability of a statistical difference in means between either two independent samples or a paired sample through time
A regression is used to understand...
the relation between specific dependent variable values and independent variable inputs
Testing using fuzzy matching is an example of diagnostic analytics for...
Identifying anomalies and outliers
Segregation of duties suggests separating:
A) Custody of assets B) Authorization of the use of the assets C) Recordkeeping from each other
Diagnostic analytics is broken down into which of the following broad categories:
A) Identifying anomalies and outliers B) Performing drill-down detailed analytics C) Performing statistical analyses
The importance of understanding the root cause of an outlier is to:
A) identify potentially fraudulent activity B) help management understand favorable variances C) help management understand unfavorable variances.
If we are running a regression to analyze the question if advertising expenses are related to sales revenue outcomes, what would be the independent variable?
Advertising expenses
Accountants generally use __________ to assess the ultimate collectability of accounts receivables and estimate the allowance for doubtful accounts.
Aging receivables analysis
Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when unplanned overtime is required to complete the job?
An Unfavorable labor rate variance
What is a hypothesis used in hypothesis testing that is opposite of the null hypothesis, or a potential result that the analyst may expect?
An alternative hypothesis
Of the following measures, What is the best measure for evaluating firm efficiency in handling and using assets A) asset turnover B) return on assets C) profit margin D) return on equity
Asset Turnover
In addition to an aging analysis to establish an allowance for doubtful accounts, what system may be used to assess the ability of customers to pay outstanding receivables?
Customer Relationship Management (CRM)
What is where a company would likely get data evaluating the customer with the highest dollar amount of orders in the past month?
Customer relationship management system
In a bank reconciliation, NSF checks are recorded by the __________, but not yet by the __________.
Bank, Company
If we run a regression where y (bankruptcy) = f (factors potentially predicting bankruptcy), what is the dependent variable?
Bankruptcy
Descriptive analytics of a return on market equity performed by what two researchers provide examples of a possible anomaly right around zero that requires further analysis?
Burgstahler and Dichev
Diagnostic analysis includes analytics such as:
Identifying anomalies and outliers, Performing drill-down detailed analytics, Performing statistical analysis
A realistic expectation an accountant could hold is that each transaction (e.g., cash receipt or cash disbursement) is __________ of any other similar transaction.
Independent
2 In a bank reconciliation, outstanding checks are recorded by the __________, but not yet by the __________.
Company, Bank
What is the best way to analyze the extreme values in the sample?
Consider the minimum or maximum
What is the best way to analyze the variability in the sample?
Consider the standard deviation
To compute the percentage change in a horizontal analysis from last year to this year, the computation will be...
Current Year - Last Year)/ Last Year.
Profit margin is computed as...
Net profit (net income) / Sales
What would have a higher expected profit margin (per dollar of sales) than shaving Crème, Banana's and Ice Cream?
Real Estate
Return on assets ratio __________ (does or does not) include a component to evaluate financial leverage, however Return on Equity, Return on Sales and Return on Investments, do include a component to evaluate leverage.
Does NOT
Compilation of the financial statements would be a form of what type of analytics?
Descriptive
If we wanted to know what level of sales was achieved last quarter at a competitor company, what type of analytics would we perform?
Descriptive
Summarizing data to understand what has happened is what type of analytics?
Descriptive
__________ will summarize how much the company paid in federal taxes last year?
Descriptive Analytics
__________ would encompass compiling the financial statements?
Descriptive Analytics
Diagnostic analytics is performed to investigate the underlying reasons for past results that cannot be answered by simply looking at the...
Descriptive data
What emphasizes "Why something happened "?
Diagnostic Analytics
What is analysis regarding the most profitable customer is an example of?
Diagnostic Analytics
What will work to explain why the average effective tax rate changed?
Diagnostic analytics
What would encompass creating Key Performance Indicators (KPI's) from the information reported in financial statements?
Diagnostic analytics
What would investigate performance different than was expected, such anomalies/outliers?
Diagnostic analytics
What looks for underlying patterns in the data by examining the data at a more detailed level in order to examine potential correlations?
Drill-down detailed analytics
If we run a regression where y (bankruptcy) = f (factors potentially predicting bankruptcy), what is the independent variable?
Factors potentially predicting bankruptcy
Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. A __________ is the expectation when the price of raw materials unexpectedly decreases below the standard price
Favorable price variance
Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. A __________ is the expectation when the usage of raw materials unexpectedly decreases below the standard quantity used
Favorable quantity variance
What do you call a tool or technique is generally used in descriptive analytics?
Horizontal analytics
Internal controls testing is an example of...
Identifying anomalies and outliers
Testing for duplicate transactions is an example of diagnostic analytics for...
Identifying anomalies and outliers
__________ already contain many of the counts, totals, sums, averages, subtotals, minimums, and maximums that are needed as part of accounting descriptive analytics.
Financial Statements
Analyzing relationships between vendors and A/P clerks to find potentially fraudulent relationships is an example of what type of diagnostic analytics?
Finding previously unknown linkages, patterns, or relationships between variables
Analyzing the sales journal to find the most profitable product sold is an example of what type of diagnostic analytics?
Finding previously unknown linkages, patterns, or relationships between variables using diagnostic analytics
The __________ provide details on the accounting policies chosen
Footnotes
Predictive analytics would be more likely to use what in its analysis than other types of analytics?
Forecasting tools, regression, and classification
__________ is used to help find customers that might have a similar address or name as employees.
Fuzzy Matching
Diagnostic analytics would be more likely to use __________ in its analysis than other types of analytics?
Fuzzy matching, Benford's law, variance analysis
Prescriptive analytics would be more likely to use __________ in its analysis than other types of analytics
Goal-seek analysis, what-if analysis
A diagram showing interrelationships between two or more variables is called a...
Graph
If the data analyst hypothesizes that grocery sales are higher on Sunday than on other days, the null hypothesis would likely state that:
Grocery sales are lower or no different on Sunday than on other days
What is an illustration of the total aged receivables in each 30-day bucket an example of?
Histogram
What is defined as a display of rectangles with area proportional to the underlying frequency of the data?
Histogram
Which analysis provides comparative changes about various line items of each financial statement over time?
Horizontal analysis
What is an example of a cash reconciling item for an item recorded by the bank but not yet recorded in the general ledger?
Interest earned on notes held by the bank
Jewelry stores have __________ profit margins than grocery stores.
Larger
Dupont analysis allows an analysis of performance for all of the following except... profit margins return on equity financial leverage liquidity
Liquidity
2 The practice of bringing specific issues to the attention of management if they depart from expectation is called...
Management by exception
What step in the AMPS model immediately precedes Performing the Analysis?
Master the data
Descriptive analytic measures of central tendency include...
Means, Medians, Modes
What would be the best measure of cental tendency if you have minimums and maximums that are far away (several standard deviations away from the mean) from the rest of the data observations?
Medians
Descriptive analytic measures of variability include...
Minimums, Maximums, and Standard Deviation
A realistic expectation an accountant may hold is that...
Most accounting transactions are made and recorded during normal work hours and normal workdays
If the hypothesized relationship is assumed to not exist, this would be an example of a...
NULL hypothesis
In fuzzy matching, if the tolerance for a match is set to 100%, what is the likely consequence for finding potential matches?
Only exact matches, no potential matches
What is most closely associated with prescriptive analytics?
Optimization
What can be defined as an observation that lies outside its expected distribution?
Outlier
What explains the extent to which a data item gains or loses magnitude or value?
Percentage change
Descriptive analytics is part of which component of the AMPS model?
Perform the Analysis
Analytics of the inventory item that produces the most profit is an example of the diagnostic analytics of...
Performing drill-down detailed analytics
While a __________ reorganizes and summarizes certain data using cross-tabulations without changing the underlying spreadsheet (or data), a __________ is a graphical depiction of those cross-tabulations.
PivotTable, PivotChart
What is a probability distribution with a low mean and highly skewed to the right?
Poisson distribution
What would include a classification analysis to assess whether the bank should extend a loan?
Predictive Analytics
Classification is most closely associated with...
Predictive analytics
What Predictive analytics?
Predictive analytics
What predicts if a company is expected to go bankrupt?
Predictive analytics
What would primarily use analytics to separate, or classify, a sample into two or more groups or classes?
Predictive analytics
What will provide insight on whether the company should rent or own its headquarters?
Prescriptive analytics
How do you compute return on assets?
Profit margin * Asset turnover
How do you compute return on equity?
Profit margin * Asset turnover * Financial Leverage
The calculation for return on equity using Dupont Analysis is...
Profit margin x Asset turnover x Financial leverage
What are the 3 Dupont Analysis measures for performance categories?
Profitability, Activity, and Solvency
Descriptive quantitative analytic measures of financial statements to help evaluate liquidity, solvency, profitability and efficiency are called...
Ratio analysis
What is comparing the extent of long-term debt to equity an example of?
Ratio analysis
What is a cash reconciling item could potentially affect either the bank statement or the general ledger?
Recording error
Evaluating the relationship between R&D expenditures and net income is an example of the diagnostic analytics of determining...
Relations/patterns/linkages between variables through statistical analysis
In vertical analysis, the relevant base for cost of goods sold is...
Sales Revenue
How do you compute Asset turnover?
Sales/Assets
2 The test to see if the key number field in a record is in correct ascending or descending order is called a...
Sequence check
3 If the p-value of the chi-square test is __________ than the α (alpha) threshold, we could conclude that the observed relationship is __________ than that expected from Benford's law.
Smaller, Different
What can be defined as a brief, generally small, visual that fits within one cell in Excel that visually depicts what happened in the cells next to it?
Sparklines
What is an estimated, or expected, cost of producing a good or service used in management accounting.
Standard cost
Which financial statement reveals the detailed company cash inflows and cash outflows during the year?
Statement of cashflows
What statement explains the changes in retained earnings from net income or losses and any (cash) dividends paid to investors?
Statement of stockholders' equity
What can potentially find a transaction that is recorded twice?
Test of duplicates
What measure would help us evaluate what happens in the highest and lowest 20 percent of the data?
The Quintiles
While Benford's Law mainly applies to the first digit of a number, it can also be applied to all of the following:
The second through fourth digits, The first two digits, and The last two digits
What analysis is generally associated with predictive analytics?
Time Series
In fuzzy matching, if the tolerance for a match is set to 0%, what is the likely consequence for finding potential matches?
Too many potential matches
In vertical analysis, the relevant base for long-term debt is...
Total Assets
Descriptive analytics would be more likely to use __________ in its analysis than other types of analytics
Totals, sums, averages, and subtotals
A realistic expectation an accountant could hold is that addresses of the company vendors are not similar to that of the company employees.
True
According to Benford's law, numbers with the first digit "3" are more likely than those with first digit "4".
True
Department stores have faster asset turnover than airline companies.
True
If the data analyst hypothesizes that grocery sales are higher when payment is made using credit cards compared to cash payment, the null hypothesis would likely state that grocery sales are lower when payment is made using credit cards compared to cash payment.
True
True or False? An adjusted R-squared value of 0 represents no ability of the model to explain the dependent variable.
True
The distribution of hearts within a fair deck of cards would follow a...
Uniform distribution
What is generally used to perform diagnostic analytics?
Variance Analytics
What expresses financial information in relation to some relevant figure or base?
Vertical analysis
What is an analysis which expresses financial information in relation to some relevant figure or base called?
Vertical analysis
Descriptive analytics addresses what question?
What happened?
What question does descriptive analytics always address?
What happened?
Prescriptive analytics address what question?
What should we do based on what we expect will happen?
What question is investigated using Prescriptive Analytics?
What should we do based on what we expect will happen?
Diagnostic analytics addresses what question?
Why did it happen?
What question does diagnostic analytics address?
Why did it happen?
Predictive Analytics emphasizes what question?
Will something happen in the future?
A company's descriptive statistics are appropriately compared to either... 1) the economy as a whole 2) the company's respective industry 3) competitors 4) the company's own prior performance.
all of the above
Descriptive analytics are analytics that __________ features and properties of the data to facilitate understanding.
characterize, summarize, and organize
The probability that a population parameter will fall between two set values is called a...
confidence interval
What is used to quantitatively analyze the relationship between and among multiple variables?
cross-tabulation
If p-value of a statistical test is 0.09 and a 95% confidence interval, you should...
fail to reject the null hypothesis (i.e., not significant result)
f p-value of a statistical test > alpha threshold, you should...
fail to reject the null hypothesis (i.e., not significant result).
If p-value of a statistical test is 0.09 and is evaluated with a 90% confidence interval, you should...
reject the null hypothesis (i.e., significant result)
If p-value of a statistical test is 0.04 and alpha is 0.10, you should...
reject the null hypothesis (i.e., significant result).
A statistic is a characteristic of a?
sample
A __________ is a subset of members selected to represent the __________
sample; population
The appropriate test to compare one sample to another sample to see if one is greater than another in some way is called a...
two-sample t-test of a difference in means
2 The practice of identifying the difference between a budget amount and actual performance is called...
variance analysis