Class 8: Perform & Communicate Descriptive Analysis

What is the definition of Descriptive Analytics?

Characterizes, summarizes, and organizes features and properties of the data to facilitate understanding

What are the Tools & Techniques of Descriptive Analytics?

Counts, sums, averages, pivot tables, percentage change, ratio analytics, vertical and horizontal analytics

What are examples of Descriptive Analysis?

Summarizing sales data, analyzing website traffic, creating performance reports.

How do the financial statements relate to descriptive analytics?

• Contains counts, totals, sums, averages, subtotals, minimums, and maximum needed for descriptive analysis

• Rich source of data

• Epitome of company performance summary

• Applying GAAP to billions of transactions results in summary statements to explain what happened during the accounting period

What does the Balance Sheet show?

Summarizes (1) what the company owns, and (2) who has claims to what the company owns at a point in time

What does the Income Statement show?

Summarizes the profitability of company for a period of time. Provides details about activities that lead to change in equity over the period

What does the Statement of Owner’s Equity Show?

Shows how retained earnings has changed over the period. Makes the connection between income and change in equity

What does the Cash Flow Statement show?

Explains the change in cash on the balance sheet. Tells how the company used and received cash over a time period

What do the Footnotes show?

Additional relevant information that cannot be or is not provided on the face of the financial statements (Text and tables)

What is Horizontal Analysis?

A method of comparing financial data over a series of periods to identify trends or changes.

What is Vertical Analysis?

A method of analyzing financial statements by comparing each line item to a base item, typically expressed as a percentage of total sales

What does a Vertical Analysis allow for?

To see where you are spending your money and how these are changing YoY

What is a D-stat table?

Provides reader with an overview of the data that the rest of the paper will analyze

What additional question does Descriptive Analytics lead to?

• Did managers make this happen?

  • What incentive do managers have? Stock options, bonuses? Do they depend on avoiding losses?

• Do managers use the flexibility within accounting standards to make earnings higher (or lower) than the expected? If they do manage earnings, how do they do that?

Is Descriptive Analysis performed first?

It’s not required, but yes

What tools are used in Descriptive Analytics?

• Text Tables

• Histograms

• Line Graphs