Chapter 5: Perform the analysis - types of data analytics

What phase of the AMPS model is focused on in Chapter 5?

Perform the Analysis

What are the four types of questions in data analytics?

What happened? Why did it happen? Will it happen in the future? What should we do?

What is descriptive analytics?

Analytics that characterize, summarize, and organize data to answer "What happened?"

What are examples of descriptive analytics questions?

Did we make a profit last year? How long have accounts receivable been outstanding?

What is diagnostic analytics?

Analytics that investigate underlying causes of past results to answer "Why did it happen?"

What are examples of diagnostic analytics questions?

Why did advertising expense increase, but sales fall? Why did overall tax increase even though net income did not?

What is predictive analytics?

Analytics that assess likelihood or probability to answer "Will it happen in the future?"

What are examples of predictive analytics questions?

What is the chance the company will go bankrupt? Can the IRS find tax evaders using predictive techniques?

What is prescriptive analytics?

Analytics that identify the best possible options given constraints to answer "What should we do?"

What are examples of prescriptive analytics questions?

How can revenues be maximized in a trade war? Should the company lease or own its office building?

What are two broad types of diagnostic analytics?

Identifying anomalies/outliers and performing drill-down analytics

What are the three broad categories of predictive analytics?

Classification, regression, and forecasting using time series analytics

What are common tools used in prescriptive analytics?

Sensitivity analysis, capital budgeting, marginal analysis, goal-seek analytics

What is a population in statistics?

A group of phenomena having something in common

What is a sample in statistics?

A subset of a population selected to represent that population

What are the types of probability distributions?

Normal (bell curve), uniform (equal likelihood), Poisson (skewed right)

What is the null hypothesis in hypothesis testing?

Assumes no significant difference between two samples or populations

What are common significance level (alpha) thresholds?

5% (0.05) and 1% (0.01)

What is the general equation format for regression analysis?

y = f(x), where y is the dependent variable and x is the independent variable

What is an example of dependent and independent variables in regression?

Dependent: sales revenue; Independent: advertising expense

What Excel tool is used for regression and forecasting?

Data Analysis Toolpak

If the alpha threshold is 0.05, and the p-value on a t-test comparing one company's ROA to the industry average ROA is 0.045, what do you conclude about the null hypothesis that the company's ROA is the same as the industry?

Reject the null hypothesis

If the alpha threshold is 0.10 and the p-value on a t-test comparing one company's ROA to the industry average ROA is 0.11, what do you conclude about the null hypothesis that the company's ROA is the same as the industry?

Fail to reject the null hypothesis

If your IQ is 130, the average population IQ is 100, and the standard deviation is 15, what is your z-score?

2 because (130-100)/15

Which type of question does predictive analytics address?

Will it happen in the future?

Which type of question does diagnostic analytics address?

Why did it happen?

What type of analytics addresses questions of “What happened?”?

Descriptive analytics

What type of analytics would address the question of whether a company will go bankrupt?

Predictive analytics

If we wanted to know what level of sales would be needed to break even given the current economic environment, we would call that ________blank analytics.

prescriptive

What type of analytics would primarily summarize facts and compute sums, averages, counts, etc.?

Descriptive analytics

What type of analytics would primarily use what-if analysis, scenario manager, and goal seek analysis?

Prescriptive analytics

What type of analytics would include Benford’s law to assess whether fraud had occurred?

Diagnostic analytics

What kind of analytics is generally used to forecast future sales, earnings, and cash flows from operating activities?

Time series

What kind of analytics is generally used to predict whether a company’s financial statements are fraudulent?

Classification

Which tool is generally associated with prescriptive analytics?

What-if scenario

Which statistic tells us how many standard deviations (σ), a data point (or observation), x_i, is from its population mean, μ?

z-score

Which distribution is a probability distribution where all outcomes are equally likely?

Uniform distribution

If p-value < = alpha threshold, you should:

reject the null hypothesis (i.e., significant result).

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

College completion rate

A ________blank t-test has more power than a ________blank t-test.

one-tailed; two-tailed

If the critical value for a one-tailed t-test at the α = 0.05 level is 1.645, the t-statistic needed to reject the null hypothesis of no difference would be ________blank.

greater than 1.645