data chapter 1

There are 2.5 of data created each day

quintillion bytes

Information overload

too much information may not be properly synthesized or interpreted

Critical thinking

manner of thinking that employs curiosity, creativity, skepticism, analytics, and logic.

Bloom’s Taxonomy

provides a hierarchical view of critical thinking skills.

Bloom’s Taxonomy ( levels from lowest to highest)

Remembering, Understanding and, Applying, Analyzing ,Evaluating and Creating

steps 3-6

Where accountants must play

steps 1-3

Where machines excel

Data analytics

process of evaluating data with the purpose of drawing conclusions

to address all types of questions

AMPS model

address financial statement analysis and managerial analytics questions

AMPS model stands for

Ask the question, master the data, perform the analysis, share the story

Ask the question example

Which shoes in inventory are obsolete or slow moving?

Master the data example

Access data regarding the amount of inventory on hand and the

cost of each specific shoe type and shoe size listed

Perform the analysis example

Calculate the inventory turnover rate

Share the story example

Report the level of inventory turnover for each SKU in a graph or

table to management

Descriptive analytics

What happened? What is happening?

(ex: Did we make profit last year? How much did we pay in the taxes last year)

Diagnostic analytics

Why did it happen? What are the root causes of past results?

(ex: Why did sales, general, and administrative expenses increase relative to the

industry?)

Predictive analytics

Will it happen in the future? It is forecastable

(ex: What is the risk of bankruptcy for each company in our portfolio?)

Prescriptive analytics

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

(ex: what is the level of sales that will allow us to break even)

Data integrity

Where data is accurate, valid, and consistent over time

Data visualization

histogram or a scatterplot might be used to help evaluate journal

entries that are big or small

Regression analysis

used to evaluate cost behavior by segregating total costs into fixed and variable cost components

Pivot table

Used to summarize the accounts receivable aging or post JE to a trial balance.

A cash flow analysis

Internal rate of return or net present value)- used to evaluate capital investments made by the firm or equity investments

Benford’s law

Used to find and evaluate unusual and potentially fraudulent

transactions

What if/ goal seek analytics

used to perform an analysis of how changing costs and other factors that affect the breakeven level of a new product.

One way to communicate would be through the use of

Visualization

Dashboard

A graphical summary of various measures tracked by a company.

Static

Characterized by the lack of constant update, change, or activity.

Dynamic

Characterized by constant update, change, or activity.

Comparison of values (Did Toyota or Tesla have greater sales last year)

Bar chart

Composition of values (what proportion of sales comes from each division of the company)

Pie chart

Distribution of values ( how many days did it take to fulfill the recent set of orders)

Histogram

Trends of values over time ( how has google’s revenue changed over the last five years)

Line graph

Relationship between values ( what is the difference between advertising expense and sales revenue for Costco)

Scatter plot

Data acquisition and preparation tools ( the software tools used to access the data and get it ready for data analysis)

Excel, Alteryx, SQL (Structured Query Language), Tableau prep and Power Bi (power query)

Data analysis tools (The software tools used to analyze data

Excel, pivot tables, data analysis toolpak, SAS, SPSS, Statistics, R and Python, GenAI

Data visualization tools (used to analyze and communicate data to decision makers)

Excel, Tableau, Power BI, Gen Ai