CGMA BA1 Fundamentals of Business Economics - The informational context of business: demonstrating relationships, trends and patterns Flashcards
What is the equation for line of best fit?
Y = a + bx
Y = the dependent variable (here costs)
A = the intercept of the y axis i.e. the point below which the y variable cannot go. If y is a cost figure,
this is the ‘fixed’ cost
B = gradient of the line of best fit. The higher b is, the steeper the gradient
X = the independent variable (here output)
What is a time series (TS)?
A time series is a set of data observed over a period of time, such as sales patterns by day, week, month, or year.
What are the four components of a time series forecast?
The four components are:
Trend (T)
Seasonal Variation (S)
Cyclical Variation (C)
Random Variation (R)
What is the “Trend” component in a time series?
Trend (T) refers to the underlying long-term movement in historic data, such as a general upward or downward trend over time, like the rise in house prices over several years.
What is “Seasonal Variation” in a time series?
Seasonal Variation (S) refers to short-term periodic fluctuations, like higher ice cream sales in summer than in winter.
What is “Cyclical Variation” in a time series?
Cyclical Variation (C) refers to longer-term fluctuations caused by economic activity or economic cycles.
What is “Random Variation” in a time series?
Random Variation (R) refers to unpredictable fluctuations, such as those caused by natural events like a hurricane.
What is the Additive Model in time series forecasting?
The Additive Model assumes that the components of a time series add together. The components are quoted in actual (absolute) terms.
TS = T + S
What is the Multiplicative (Proportional) Model in time series forecasting?
The Multiplicative Model assumes that the components multiply together. The components are quoted as a percentage or fraction of the trend (T).
TS = T * S
