Section 2: Financial and Managerial Analysis Techniques

Question 1

Financial & Managerial Analysis Techniques

Answer 1

• Time value of money
• Payback Analysis
• Flowcharting
• Earned Value Management
• Regression Analysis
• Forensic Auditing
• Data Analytics
• Competitive Sourcing Analysis
• Ratio Analysis

Question 2

3 broad purposes for spending money

Answer 2

• Current Operations
• Capital Outlays
• Debt Service

Question 3

What is Time Value of Money

Answer 3

Comparing the value of money at different points in time.

Question 4

2 types of time value analysis

Answer 4

• Present Value Analysis
• Future Value Analysis

Question 5

Present Value Formula

Answer 5

F / (1+r)n
- P is the principal that can be invested today
- F is the future value the investment will return.
- r is the interest rate. Sometimes called discount or opportunity rate.
- n is the number of years until the benefit is received.

Question 6

Future Value Formula

Answer 6

F = P(1+r)n
- F is the future value the investment will return
- P is the principal that is to be invested today
- r is the interest rate
- n is the numbers of years until the benefit is received

Question 7

Other Factors To Consider For Investing

Answer 7

• Availability of funding
• Impact of rules and regulations
• Likelihood of changing technology
• Capacity to provide the goods or service
• Projected operating costs

Question 8

Payback Analysis

Answer 8

Determines how long it will take to recover the amount invested in a new capital asset. Simpler than time value analysis.

Question 9

Flowcharting

Answer 9

Technique used to obtain or convey an understanding of a process. Used in Business Process Reengineering.

Question 10

What does a CIRCLE represent on a flowchart?

Answer 10

Start of a process

Question 11

What does a RECTANGLE represent on a flowchart?

Answer 11

Step in a process

Question 12

What does a DIAMOND represent on a flowchart?

Answer 12

Decision in a process

Question 13

What does a DOCUMENT shape represent on a flowchart?

Answer 13

A report

Question 14

What is Earned Value Management

Answer 14

A technique for managing large projects. It quantifies progress on the project by considering the funds expended, the time expended, and the status of deliverables.

Question 15

Regression Analysis

Answer 15

An analysis technique that explores, develops an understanding for, and predicts the relationships among variables.

Question 16

Types of Regression

Answer 16

• Direct Linear
• Inverse Linear

Question 17

Correlation Coefficient

Answer 17

Predicts the degree of accuracy with which the regression can be used to predict results.

A statistical measure, between -1 and +1 that calculates the strength of the relationship between the relative movements of the two variables.

1 is perfect but rare. -.85 is the threshold for an acceptable direct relationship that is sufficiently reliable for forecasting.

Question 18

Fraud Reduction and Data Analytics Act of 2015

Answer 18

Enacted to improve Federal agency financial and administrative controls and procedures to assess and mitigate fraud risks, and to improve Federal agencies’ development and use of data analytics for the purpose of identifying, preventing, and responding to fraud, including improper payments.

Requires OMB to establish guidelines for agencies to use GAO’s A Framework for Managing Fraud Risks in Federal Programs

Requires agencies to use a risk-based approach to design and implement controls to mitigate identified fraud risks.

Question 19

What is Data Analytics

Answer 19

Process of inspecting, cleaning, transforming, and modelling data with the goal of discovering useful information, suggesting conclusions, and supporting decision making.

Question 20

Data Mining

Answer 20

A data analysis technique that focused on modeling and knowledge-discovery for predictive, rather than descriptive, purposes.

Question 21

Predictive Analytics

Answer 21

A variety of techniques from statistics, modeling, machine learning and data mining that analyze current and historical facts to make predictions about future, or otherwise unknown, events.

Question 22

Strengths of Data Analytics

Answer 22

• Analyst is able to review complete data sets.
• The ability to link together multiple data sets.

Question 23

Forensic Auditing

Answer 23

An examination of an organization or individual’s financial information and other economic affairs, in which evidence is collected, that is likely to be used for the identification, investigation and prosecution of financial crimes, such as theft or fraud and/or the determination of negligence.

Question 24

Steps in Forensic Analytics

Answer 24

• Data Collection
• Data Preparation
• Data Analysis
• Reporting

Question 25

Benford Digital Analysis

Answer 25

A forensic analytic technique predicated on the observation that more transactions begin with the number one than larger numbers.

Question 26

Competitive Sourcing Analysis

Answer 26

• Conduct a management study
• Prepare a performance work statement
• Project the in-house and contract costs
• Select the best alternative

Question 27

Types of Ratios

Answer 27

• Pure Ratios
• Comparative Analysis
• Time-Series Analysis
• Common Size Statements
• Per Capita Information

Question 28

2 Types of Liquidity Ratios

Answer 28

• Current Ratio
• Quick Ratio

Question 29

Liquidity Ratios

Answer 29

Used to determine an entity’s abilities to meet its creditor’s demands.

Question 30

Current Ratio

Answer 30

An entity’s current assets divided by its current liabilities.

Question 31

Quick Ratio

Answer 31

Compares cash and cash equivalents to current liabilities.

Question 32

Receivables Ratios

Answer 32

• Percent of taxes collected
• Days receivables outstanding

Question 33

Percent of taxes collected

Answer 33

Measures: Performance collecting receivables

Question 34

Days Receivables Outstanding

Answer 34

Measures: Efficiency with which an organization collects its receivables.

Question 35

Average Receivables

Answer 35

Beginning of the Year Receivables, plus the end of year receivables, divided by two.