ACT 441 EXAM 2 QUESTIONS AND VERIFIED
ANSWERS
Week 8
Ask the Question
Master the Data
Perform the Analysis
Share the Story - Answers - What does the AMPS model represent?
1. What happened?
2. Why did it happen?
3. Will it happen in the future?
4. What should we do, based on what we expect will happen? - Answers - What are the
4 Types of Questions for Perform the Analysis?
Descriptive Analytics - Answers - Analytics performed that characterizes, summarizes,
and organizes features and properties of the data to facilitate understanding.
To be useful to decision makers, accounting needs to be both relevant and faithfully
represent the substance of what actually occurred.
This is consistent with what descriptive analytics attempts to provide to the many
current and potential users of accounting data - Answers - What are the Goals of
Accounting and Descriptive Analytics?
1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows
4. Statement of Stockholders' Equity
5. Footnotes
,6. 10/K Filing - Answers - What are the 6 Accounting Data Sources for Descriptive
Analytics?
1. Mean, Median, Mode
2. Minimums, Maximums
3. Standard Deviation
4. Quartiles/Deciles
5. Counts
6. Totals, Sums, Subtotals
7. Graphs (Bar Charts)
8. Percentage Change
9. PivotTables
10. Histogram
11. Ratio Analytics
12. Vertical Analytics
13. Horizontal Analytics - Answers - What are the 13 Descriptive Analytics
Tools/Techniques?
Scale
- want to make sure that we are starting at 0 so the variance is not misconstrued -
Answers - ___ is very important to bar graphs
Depends on what is most easy to understand for the ultimate user and what the specific
analytic question that we were trying to address
- If we are looking for trends then graphs or charts are more useful.
- IF trying to identify a particular quantity or data point amount - Answers - When should
you use tables and when should you use charts for descriptive analytics?
Horizontal Analyses - Answers - Provides comparative increases about various line
items of each financial statement over time.
Ex. 2017, 2018, 2019 all shown and we are working across those
(New - Old) / Old - Answers - Horizontal Analyses Formula
, * Percentage Change
Vertical Analyses - Answers - Expresses financial information in relation to some
relevant figure, or base.
For example, on an income statement, the relevant base would be net sales revenue.
(showing them as a % of net sales)
On a balance sheet, the relevant base for a balance sheet line item would be total
assets.(showing them as a % of total assets)
DuPont Analysis - Answers - Disaggregation of Return on Equity (ROE) into its three
component parts
Ex. Walmart vs Target
1. Profit margin
2. Asset turnover
3. Financial Leverage - Answers - What are the 3 component parts to Return on Equity
(ROE)?
= Profit Margin × Asset Turnover × Financial Leverage
= Net Profit / Equity - Answers - Return on Equity (ROE)=
Walmart has higher asset turnover but lower profit margin. While Target has the
opposite.
We are able to see these differences using DuPont Analysis - Answers - Walmart vs.
Target Example
We could use the DuPont ratio as it does all of these things. It looks at profit margin,
asset turnover in terms of efficiency, and financial leverage explains the different capital
structures. - Answers - What descriptive analytics could be used to identify different
profitability, different efficiency and different capital structures?
Descriptive analytics, as the first step, leads to additional questions: - Answers - Why
would this be?
Did managers make this happen?
Do managers not like small losses? Do they prefer small gains?
ANSWERS
Week 8
Ask the Question
Master the Data
Perform the Analysis
Share the Story - Answers - What does the AMPS model represent?
1. What happened?
2. Why did it happen?
3. Will it happen in the future?
4. What should we do, based on what we expect will happen? - Answers - What are the
4 Types of Questions for Perform the Analysis?
Descriptive Analytics - Answers - Analytics performed that characterizes, summarizes,
and organizes features and properties of the data to facilitate understanding.
To be useful to decision makers, accounting needs to be both relevant and faithfully
represent the substance of what actually occurred.
This is consistent with what descriptive analytics attempts to provide to the many
current and potential users of accounting data - Answers - What are the Goals of
Accounting and Descriptive Analytics?
1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows
4. Statement of Stockholders' Equity
5. Footnotes
,6. 10/K Filing - Answers - What are the 6 Accounting Data Sources for Descriptive
Analytics?
1. Mean, Median, Mode
2. Minimums, Maximums
3. Standard Deviation
4. Quartiles/Deciles
5. Counts
6. Totals, Sums, Subtotals
7. Graphs (Bar Charts)
8. Percentage Change
9. PivotTables
10. Histogram
11. Ratio Analytics
12. Vertical Analytics
13. Horizontal Analytics - Answers - What are the 13 Descriptive Analytics
Tools/Techniques?
Scale
- want to make sure that we are starting at 0 so the variance is not misconstrued -
Answers - ___ is very important to bar graphs
Depends on what is most easy to understand for the ultimate user and what the specific
analytic question that we were trying to address
- If we are looking for trends then graphs or charts are more useful.
- IF trying to identify a particular quantity or data point amount - Answers - When should
you use tables and when should you use charts for descriptive analytics?
Horizontal Analyses - Answers - Provides comparative increases about various line
items of each financial statement over time.
Ex. 2017, 2018, 2019 all shown and we are working across those
(New - Old) / Old - Answers - Horizontal Analyses Formula
, * Percentage Change
Vertical Analyses - Answers - Expresses financial information in relation to some
relevant figure, or base.
For example, on an income statement, the relevant base would be net sales revenue.
(showing them as a % of net sales)
On a balance sheet, the relevant base for a balance sheet line item would be total
assets.(showing them as a % of total assets)
DuPont Analysis - Answers - Disaggregation of Return on Equity (ROE) into its three
component parts
Ex. Walmart vs Target
1. Profit margin
2. Asset turnover
3. Financial Leverage - Answers - What are the 3 component parts to Return on Equity
(ROE)?
= Profit Margin × Asset Turnover × Financial Leverage
= Net Profit / Equity - Answers - Return on Equity (ROE)=
Walmart has higher asset turnover but lower profit margin. While Target has the
opposite.
We are able to see these differences using DuPont Analysis - Answers - Walmart vs.
Target Example
We could use the DuPont ratio as it does all of these things. It looks at profit margin,
asset turnover in terms of efficiency, and financial leverage explains the different capital
structures. - Answers - What descriptive analytics could be used to identify different
profitability, different efficiency and different capital structures?
Descriptive analytics, as the first step, leads to additional questions: - Answers - Why
would this be?
Did managers make this happen?
Do managers not like small losses? Do they prefer small gains?
