AMA Q22 - Chapter 2

Question 1

Time series definition

Answer 1

a series of values or figures recorded over time

Question 2

What does T mean?

Answer 2

Trend

Question 3

How is a trend noticed?

Answer 3

Evaluating whether there are moving averages in a particular value

Question 4

SV

Answer 4

Seasonal Variation

Question 5

How is a Seasonal Variation observed?

Answer 5

A smaller and shorter trend that counters the overall long-term trend that is predictable

Question 6

TS

Answer 6

Time Series Forecast

Question 7

Formula for TS

Answer 7

TS = T + SV

Question 8

How do you calculate a trend across a moving average?

Answer 8

determine how often the seasonal variations are (must be even) and then divide each seasonal period by an individual period

Question 9

What is the criteria for a centred moving average?

Answer 9

The seasonal variations are an even number; must not be odd

Question 10

How do you calculate a centred moving average?

Answer 10

You average the moving average

Question 11

formula for the Multiplicative Model

Answer 11

TS = T x SV

Question 12

Linear Regressions

Answer 12

Predicting a value based on the assumption that a known value has a linear relationship to the unknown value

Question 13

Index Number

Answer 13

The average change in a group of different items. Can be used to inflate/deflate future/past datasets for forecasting

Question 14

Basket

Answer 14

An sub-group within an index number

Question 15

Base Period (Index numbers)

Answer 15

the period in a time series that yields the index of 100

Question 16

Index Formula

Answer 16

current period value / base period value x 100

Question 17

Cash flow deflated to previous period

Answer 17

cash flow to deflate x (previous period index number / cash flow year index number)

Question 18

What are some downsides to index forecasting?

Answer 18

The weightings of each basket item may not reflect the reality of the business
Due to frequent changes, the weightings or even make up of a basket need to be revised regularly

Question 19

Interpolation definition

Answer 19

forecasts data within a historical data range

Question 20

Extrapolation definition

Answer 20

forecasts data outside of a historical data range

Question 21

List some limitations of forecasting

Answer 21

• Factors outside the business’ control like political, economical or market changes can alter the accuracy
• Marketing/advertising will impact data and therefore need to be factored
• The further the forecast, the more unpredictable and unreliable it becomes

Question 22

Two approaches of sensitivity analysis

Answer 22

1. Calculating max change in a variable before the outcome would change
2. Determining whether an estimated change in a variable would impact the outcome

Question 23

Pros of sensitivity analysis

Answer 23

• easy to understand
• highlights most important variables

Question 24

Cons of sensitivity analysis

Answer 24

• assumes all variables are independent from each other
• Does not assess probability

Question 25

How to calculate the seasonal variation?

Answer 25

original value less the centred moving average