Chapters 5-9

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

If the profit margin is 0.1142, asset turnover is 0.5619 and financial leverage is 1.2937, what is the return on asset?

0.0642

If the profit margin is 0.1142, asset turnover is 0.5619 and financial leverage is 1.2937, what is the return on equity?

0.0830

According to the normal distribution, __________% of the data would fit within 1 standard deviations of the mean.

68

All other things equal, in which of the following buckets would you expect the least amount of aged receivables to be?

91-120

According to the normal distribution, __________% of the data would fit within 2 standard deviations of the mean.

95

Which analytics tool or technique is generally used in descriptive analytics?

horizontal analytics

When using regression analysis, the relationship between two variables matters when you are trying to understand __________.

how an independent variable impacts a dependent variable

Testing for duplicate transactions is an example of what type of diagnostic analytics?

identifying anomalies and outliers

Performing a bank reconciliation is example of the diagnostic analytics of __________.

identifying anomalies/outliers

Predictive and prescriptive analytics provide __________ deterministic output and __________ probabilistic models (judging the likelihood (probability) of a future event or outcome occurring) as compared to descriptive and diagnostic analytics.

less; more

What would be the independent variable in a regression determining "How are firm overhead costs dependent on the time for production?" at a manufacturing company?

machine hours

The practice of bringing specific issues to the attention of management if they depart from expectation is called __________.

management by exception

Of the following measures, the best way to analyze the extreme values in the sample is to consider the __________.

maximum or minimum

The __________ recent the accounts receivable (i.e., shorter amount of time it has been outstanding), the __________ likely it will be that they will ultimately be collected.

more, more

If the hypothesized relationship is assumed to not exist, this would be an example of a(n) __________ hypothesis.

null

What is an observation that lies outside its expected distribution?

outlier

A __________ is a characteristic of a population.

parameter

Diagnostic analytics is broken down into all except for which of the following broad categories?

performing descriptive analytics

Analytics of the inventory item that produces the most profit is an example of the diagnostic analytics of __________.

performing drill-down detailed analytics

Diagnostic analysis includes all of the possible types of analytics except for which of the following?

performing marginal analysis

__________ is the repeatability of the financial statement variables (e.g., earnings, sales, cash flows) over time.

persistence

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; pivot chart

__________ are brief, generally small, visuals that fit within one cell in Excel that visually depict what happened in the cells next to it.

sparklines

Of the following measures, the best way to analyze the variability in the sample is to consider the __________.

standard deviation

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

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 regression is used to understand:

the relation between specific dependent variable values and independent variable inputs

Forecasting sales for budget purposes is an example of which type of predictive analytics?

time series

Using past performance to predict future performance is called __________.

time series

In vertical analysis, the relevant base for long-term debt is which of the following?

total assets

What would be the dependent variable in a regression determining "How are firm costs dependent on the level of production?" at a decking company?

total production costs

Descriptive analytics would be more likely to use these tools in its analysis than other types of analytics?

totals, sums, averages, and subtotals

Of the following measures, the best measure for evaluating firm efficiency in handling and using assets is __________.

asset turnover

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.

Profit margin is computed as follows:

Net profit (net income) / Sales

The calculation for return on equity using Dupont Analysis is:

Profit margin x Asset turnover x Financial leverage

Asset turnover is computed as follows:

Sales / Assets

Which type of question does prescriptive analytics address?

What should we do based on what we expect will happen?

Diagnostic analytics addresses which of the following questions?

Why did it happen?

The persistence of operating income as compared to cash flows from operations is consistent with GAAP requiring the use of __________ accounting for financial reporting purposes.

accrual-basis

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

A(n) __________ hypothesis is a hypothesis used in hypothesis testing that is opposite of the null hypothesis, or a potential result that the analyst may expect.

alternative

If we run a regression where y (bankruptcy) = f (factors potentially predicting bankruptcy), what is the dependent variable?

bankruptcy

Which predictive analytics technique would be used to predict whether a firm is likely to have a material misstatement in the coming year?

classification

In a bank reconciliation, outstanding checks are recorded by the __________, but not yet by the __________.

company; bank

The probability that a population parameter will fall between two set values is called a __________.

confidence interval

__________ analytics are often the first type of analytics performed that leads to other types of analytics for further investigation.

descriptive

Which type of analytics would encompass compiling the financial statements?

descriptive analytics

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

If we run a regression where y (bankruptcy) = f (factors potentially predicting bankruptcy), what is the independent variable?

factors potentially predicting bankruptcy

According to Benford's law, numbers with the first digit "4" are more likely than those with first digit "3".

false

Diagnostic analytics emphasizes "What happened?".

false

Dupont analysis allows an analysis of profit margins, asset turnover and liquidity.

false

We would expect a positive relationship (+) between loan acceptance and the debt-to-income ratio.

false

Which type of analysis would predictive analytics not be useful?

finding anomalies and outliers

__________ is used to help find customers that might have a similar address or name as employees.

fuzzy matching

Prescriptive analytics would be more likely to use these tools in its analysis than other types of analytics?

goal-seek analysis, what-if analysis

According to Altman's Z, the __________ amount of long-term profitability generally leads to __________ risk of bankruptcy.

greater; lower

A __________ is a display of rectangles with area proportional to the underlying frequency of the data.

histogram

An illustration of the total aged receivables in each 30-day bucket is an example of a __________.

histogram

__________ provides comparative changes about various line items of each financial statement over time.

horizontal analysis

Which type of analytics will forecast sales?

predictive analytics

Which type of analytics will provide insight on whether the company should rent or own its headquarters?

prescriptive analytics

Comparing the extent of long-term debt to equity is an example of __________.

ratio analysis

Descriptive quantitative analytic measures of financial statements to help evaluate liquidity, solvency, profitability and efficiency are called __________.

ratio analysis

Estimating the appropriate cost driver as part of activity-based costing is an example of which type of predictive analytics?

regression

Which ratio does not include a component to evaluate financial leverage?

return on assets

In vertical analysis, the relevant base for cost of goods sold is which of the following?

sales revenue

A statistic is a characteristic of a __________.

sample

A __________ is a subset of members selected to represent the __________.

sample; population

The test to see if the key number field in a record is in correct ascending or descending order is called a(n) __________ check.

sequence

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)

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)

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 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

A company's descriptive statistics are appropriately compared to either 1) the economy as a whole, 2) the company's respective industry, 3) competitors and 4) the company's own prior performance.

true

A realistic expectation an accountant could hold is that addresses of the company vendors are not similar to that of the company employees.

true

A realistic expectation an accountant may hold is that "Most accounting transactions are made and recorded during normal work hours and normal workdays".

true

Descriptive analytics are analytics that characterize, summarize, and organize features and properties of the data to facilitate understanding.

true

Financial statements already contain many of the counts, totals, sums, averages, subtotals, minimums, and maximums that are needed as part of accounting descriptive analytics.

true

Standard cost is an estimated, or expected, cost of producing a good or service used in management accounting.

true

The balance in the cash account is deterministic as compared to being probabilistic.

true

The practice of identifying the difference between a budget amount and actual performance is called:

variance analysis

__________ expresses financial information in relation to some relevant figure or base.

vertical analysis