Data Analytics
I learned that probability distribution can be done using random variable, discrete, binomial and poison methods.
Random variables method – requires the understanding of the previous patterns of occurrence.
Binomial Distribution – indicates that only two outcomes are possible which can be success or failure, buy or do not buy, good or bad. This requires identical trials that are independent and static probability.
Corporate Financial Accounting, CFA
I learned more about posting account transactions on the balance sheet. Some transactions are posted under assets while others go under liabilities and owners equities with the convention that the summation of transactions under assets must be equalled to the combination of liabilities and owner equities following the equation stated below;
Assets = Liabilities + Owner Equities
Similarly, the transactions can also be posted using the debit and credit convention which states that all postings under assets would be posted in debit while liabilities and owner equities go under debt. The summation under debit must also be equalled to that under credit.
In all cases, incomes and expenditures often affect assets, liabilities and owner equities by increasing or decreasing them.
CFA – Evaluating and Improving Firm Performance
Evaluating and improving firm performance can be done in two stages;
- Synthesis: involves bookkeeping leading to the development of financial statements
- Analysis: involves tearing apart, dissecting and unbundling financial statements and looking at the relationships to generate insights that can be used to make decisions by various stakeholders of the organization
Effective evaluation and management of firm performance would require measurements since only what gets measured can be managed. Such measurements are thereafter classified into accounting-based and market-based indicators.
The type of information from the analysis to be made available to a user depends on the intended uses, the types of decisions to be made and the available means of analyzing the information.
Financial analytical tools available to us include;
- Graphs such as bar, pie, and scatter graphs
- Regression tool
- Common-size analysis
- Financial ratio analysis
The type of analysis to be performed on financial statements varies depending on the diversity of users, levels of knowledge, information need for a particular decision and the general nature of the financial statement.
Types of Financial Statements Analyzers
- Internal Users e.g management – do the analysis to plan, evaluate and control company operations
- External Users e.g investors, regulators, regulatory agencies – do the analysis to assess past performance, current position and make predictions about the future profitability and insolvency of the company and evaluate the effectiveness of the management
Type of Analysis
- Horizontal analysis – analyzes two years at a time with one year as current and the other as a comparator.
- Vertical analysis – analyzes one year at a time and expresses each item as a percentage of the significant total.
- Trend percentages – analyzes current trend to predict the future one
- Common-size analysis – expresses each line item as a percentage of a base figure on the financial statements.
- Ratio analysis – expresses the logical relationship between items in a financial statement of a single period
