Analytics, Visualisation and Dashboards in Finance and Costing — Practice

Question 1

What range of values can a correlation coefficient take?

Accepted Answer

Between -1 and +1.

Question 2

Which chart type is most appropriate for showing a trend over 12 months?

Accepted Answer

A line chart.

Question 3

In the regression equation y = a + bx used for cost estimation, what does 'a' represent?

Accepted Answer

The estimated fixed cost.

Question 4

If regression on five months of overhead-cost data gives b = 3.5 and a = 1,200, estimate total overhead cost for a month with 400 machine hours.

Accepted Answer

y = 1,200 + (3.5 x 400) = 1,200 + 1,400 = Rs. 2,600.

Question 5

R-squared for a regression model is 0.64. What proportion of the variation in the dependent variable is left unexplained by the model?

Accepted Answer

36% (1 - 0.64) is left unexplained by factors outside the model.

Question 6

Name two design principles a well-built finance dashboard should follow.

Accepted Answer

Any two of: prioritise the most important KPIs in a prominent position, use consistent (not decorative) colour coding against targets, provide drill-down capability into underlying detail, and avoid clutter from too many small charts.

Question 7

Explain why least-squares regression is generally preferred over the high-low method for cost estimation when more than two months of cost-activity data are available.

Accepted Answer

The high-low method bases its entire fixed/variable cost estimate on only the two extreme (highest and lowest activity) observations, so a single unusual or outlier month can distort the whole estimate. Least-squares regression instead uses every available observation, weighting the fitted line to minimise the overall squared deviation across all points, which makes it far less sensitive to any single unusual observation and generally more statistically reliable whenever sufficient data points exist.

Question 8

A report uses a 3-D bar chart to compare quarterly sales across four regions. Explain why this is a poor visualisation choice even though a bar chart is otherwise the correct chart type for this comparison.

Accepted Answer

A bar chart is the right chart type for comparing a few categories, since bar length is easy for the eye to compare accurately. However, the 3-D rendering distorts the true proportions of the bars through perspective effects (bars further back appear smaller than their true value relative to bars in front), which can mislead a viewer about the actual relative size of each region's sales even though the underlying chart-type choice was correct.

Practice — Analytics, Visualisation and Dashboards in Finance and Costing

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