Chapter 6 :Perform the Analysis - Descriptive Analytics

What is Descriptive Analytics?

Smmarizes and describe what has happened in the past and is typically the first type of analytics performed in accounting.

What are the common measures of central tendency used in descriptive analytics?

Mean, median, and mode.

What are the common measures of variability used in descriptive analytics?

Standard deviation, range, minimums, and maximums.

Name some visualization tools used in descriptive analytics.

Graphs, histograms, and sparklines.

What are two specific accounting applications of descriptive analytics mentioned?

Accounts receivable aging schedules and allowance estimation.

Explain Vertical Analysis in financial statements.

expresses financial statement items as a percentage of a base amount (e.g., sales or assets).

Explain Horizontal Analysis in financial statements.

analyzes percentage changes in financial statement items over time.

What is Ratio Analysis, and what key aspects does it assess?

assesses liquidity, profitability, solvency, and efficiency (e.g., profit margin, asset turnover, return on equity).

What is DuPont Analysis?

breaks return on equity (ROE ) into three components: profit margin, asset turnover, and financial leverage. It is useful for identifying strengths and weaknesses in performance.

What are PivotTables used for in Excel for descriptive analytics?

for cross-tabulations and drill-downs to summarize and explore data.

What are Sparklines used for in Excel?

mini-charts used to visualize trends within individual cells.

What are Treemaps used for in Excel?

used for displaying proportional data visually, often in a hierarchical structure.

When comparing asset turnover, which tends to be faster: department stores or airlines?

Department stores generally have faster asset turnover than airlines.

In the presence of outliers, which measure of central tendency is generally more reliable: mean or median?

Medians are more reliable than means in the presence of outliers.

What benchmarks should company performance be compared to?

Company performance should be compared to the industry, the economy, and prior periods.

What does DuPont analysis decompose Return on Equity (ROE) into?

Profit margin, asset turnover, and financial leverage

Which analysis breaks data into 4 equal parts?

Quartiles

Which graphic is best to show growth over time?

Line chart

What does a high coefficient of variation indicate?

High relative dispersion

Which visual is most effective for showing the distribution of transaction values?

Histogram

Vertical analysis uses which base for income statements?

Net sales revenue

Which of the following is a measure of central tendency?

Median

Which of these represents a percentage of net sales?

Vertical analysis on income statement

Which situation justifies using the median instead of the mean?

There are extreme outliers