Sunday, August 26, 2012
QBA 775 Time series regression
Standard error: standard deviation divided by the square root of the sample size.
Exact relationship: y = mx + b
Probabilistic relationship: y-hat = b-sub-zero + b-sub-one*x
How to evaluate accuracy?
SSR: sum of squares regression. Sigma (x-hat - x-bar)^2
The bigger the SSR, the "better" the model.
SSE: sum of squares error/residual. Sigma (x - y-hat)^2
The bigger the SSAE, the "worse" the model.
SST: Sum of squares total. Sigma (y - y-bar)^2
Coefficient of determination: R^2 = SSR/SST
Bigger is better
Perfect prediction: R^2 = 1
No prediction: R^2 = 0
Standard error: S-sub-e = square root of (SSE/degrees of freedom)
Taken together, SSR, SSE, and SST tell us how far off our model is.
Is there a correlation at all?
t = (b-sub-one - B-sub-one) / S-sub-b-one
P value: < 0.05 reject null hypothesis (95%)
Time-Series regression:
y = value being evaluated
x = time interval
Time horizon series: y = trend*cycle*season
Immediate: x < 1 week
Short-term: 1 week < x < 3 months
Medium-term: 3 months < x < 2 years
Long-term: qualitative forecasting
First-order model (linear trend)
y-hat = b-sub-zero + b-sub-one*x
Confidence interval: x-bar = Z*S-sub-x-bar
Second-order model (non-linear)
y-hat = b-sub-zero + b-sub-one*t + b-sub-two*t^2
Third-order model (exponential)
y-hat = a*e^(b*t)
Saturday, August 25, 2012
Accounting ch. 2 notes, pt 2
The accounting equation (assets = liabilities + owner's equity) has to be in balance after every transaction.
The concept of 'a going concern': the business will continue to operate indefinitely, ie not planned to be liquidated.
Cost principle: transactions are recorded at their original, historical cost value, regardless of increases in the market value of the asset.
Matching concept: expenses should be deducted from revenue within the same time-period. Don't compare this year's revenue to last year's expenses.
Accrual accounting: Revenue is noted at the time of sale, not the receipt of payment. Expenses are noted when they're incurred, not when they're paid for.
Full disclosure: financial reports should include all pertinent information to prevent the reader from being misled.
Materiality: Financial statements don't need to be technically precise as long as any rounding is done to increase understanding, not to obscure or mislead.
Materiality is relevant because some accounting techniques require estimation, for instance depreciation, where you must estimate the expected lifespan of the equipment, and also its expected salvage value. So the amount depreciated = purchase cost - salvage value. The cost of servicing any warranties is another are where you can only estimate the liability incurred.
The concept of 'a going concern': the business will continue to operate indefinitely, ie not planned to be liquidated.
Cost principle: transactions are recorded at their original, historical cost value, regardless of increases in the market value of the asset.
Matching concept: expenses should be deducted from revenue within the same time-period. Don't compare this year's revenue to last year's expenses.
Accrual accounting: Revenue is noted at the time of sale, not the receipt of payment. Expenses are noted when they're incurred, not when they're paid for.
Full disclosure: financial reports should include all pertinent information to prevent the reader from being misled.
Materiality: Financial statements don't need to be technically precise as long as any rounding is done to increase understanding, not to obscure or mislead.
Materiality is relevant because some accounting techniques require estimation, for instance depreciation, where you must estimate the expected lifespan of the equipment, and also its expected salvage value. So the amount depreciated = purchase cost - salvage value. The cost of servicing any warranties is another are where you can only estimate the liability incurred.
Friday, August 24, 2012
Accounting 600 ch. 2 notes, pt 1.
Transaction: economic exchange between entities. (ie sales/purchases, receipt of cash by a borrower, payment of cash by a lender)
Accounts: A record in which transactions are summarized. (a summary of transactions.)
Financial statements: A summary of accounts.
Fiscal year: Any 12-month period used for generating fiscal reports. Frequently the calendar year.
Balance sheet / statement of financial position: Snapshot of assets, liabilities and owner's equity at a given point in time.
Basic requirements for a financial statement (name of financial statement):
1. Financial position at the end of the period (balance sheet)
2. Earnings for the period (income statement)
3. Cash flows for the period (statement of cash flows)
4. Investments by and distributions to owners during the period (Statement of changes in owners' equity)
Accounting / balance sheet equation: Assets = Liabilities + owner's equity
Owner's equity = Assets - liabilities
Owner's equity = net assets
Assets: resources owned by the business. ie cash, merchandise, equipment, or money you're owed (accounts receivable).
Liabilities: Any amount owed to other entities (accounts payable).
Owner's equity / net assets: Any assets remaining after subtracting liabilities.
Financial statements don't show current market value of assets, only the amount paid for assets.
Kinds of assets:
Cash: Cash on-hand or readily available in bank accounts
Accounts receivable: amount owed to business by customers when purchasing on credit.
Merchandise inventory: Unsold merchandise in your inventory.
Equipment: Cost of things like shelving, display racks, other store equipment.
Accumulated depreciation: the portion of the cost of equipment estimated to have been used up in the course of doing business. Depreciation is the practice of spreading the cost of an asset over its expected useful lifespan, not an attempt to account for loss of market value through age or use.
Accounts payable: Amount owed to suppliers for goods bought on credit.
Accrued liabilities: amount owed to creditors, including wages owed to employees.
Short-term debt: amount borrowed that will be repaid within 12 months of the balance sheet's date.
Long-term debt: amount borrowed that will not be repaid within 12 months of the balance sheet's date.
Current assets: Assets which are likely to be converted into cash and used for the business within 12 months.
Current liabilities: Obligations likely to be paid with cash within 12 months.
Income statement / profit and loss / earnings statement / statement of operations = (Revenue - expenses) + (gains - losses.)
Revenue: Cash or assets gained through 'normal' operations of the business.
Expenses: Spent cash or used up assets to complete 'normal' business operations.
Gains: Assets gained through incidental transaction that aren't part of 'normal' operations or invest by owners.
Losses: Decrease in assets due to incidental transactions that aren't part of 'normal' operations or distributions to owners.
Income statement report assets and liabilities for a period of time, not a snapshot of a specific date like a balance sheet.
Net sales - cost of goods sold = gross profit
Gross profit - administrative + operating expenses (wages, depreciation, advertising, etc.) = income from operations
Income from operations - interest paid for loans = before-tax income
Before-tax income - taxes = Net income
Net income divided by number of outstanding shares = earnings per share
Statement of changes in owners' equity / statement of changes in retained earnings / statement of changes in capital stock: has a period of time like an income statement.
Owner's equity = Paid-in capital + (retained earnings = net income - dividends)
Statement of cash flows: used to determine sources and uses of cash during the time period.
Three principal forms of business organization:
Proprietorship: single owner, easy to start, owner is liable for all debts incurred by the business (unlimited liability)
Partnership: A group of proprietors. Unlimited personal liability, unless set up as an LLP (limited liability partnership)
Corporation: Owners = stockholders who are issues stock as evidence of ownership. More complex tax structure compared to proprietorship/partnership. More expensive to form. Can form an LLC (limited liability company) to get some of the benefits of being a corporation without some of the formalities of a corporate structure.
Assets = A
Liabilities = L
Paid-in Capital = PIC
Retained earnings, beginning of period = RE1
Retained earnings, end of period = RE2
Net income for period = NET
Dividends = DIV
A = RE2 + L + PIC
RE2 = A - L - PIC
DIV = RE1 - RE2 + NET
RE2 = RE1 + NET - DIV
RE1 = RE2 - NET + DIV
A - L = OE
OE = PIC + RE
RE = NET - DIV
Accounts: A record in which transactions are summarized. (a summary of transactions.)
Financial statements: A summary of accounts.
Fiscal year: Any 12-month period used for generating fiscal reports. Frequently the calendar year.
Balance sheet / statement of financial position: Snapshot of assets, liabilities and owner's equity at a given point in time.
Basic requirements for a financial statement (name of financial statement):
1. Financial position at the end of the period (balance sheet)
2. Earnings for the period (income statement)
3. Cash flows for the period (statement of cash flows)
4. Investments by and distributions to owners during the period (Statement of changes in owners' equity)
Accounting / balance sheet equation: Assets = Liabilities + owner's equity
Owner's equity = Assets - liabilities
Owner's equity = net assets
Assets: resources owned by the business. ie cash, merchandise, equipment, or money you're owed (accounts receivable).
Liabilities: Any amount owed to other entities (accounts payable).
Owner's equity / net assets: Any assets remaining after subtracting liabilities.
Financial statements don't show current market value of assets, only the amount paid for assets.
Kinds of assets:
Cash: Cash on-hand or readily available in bank accounts
Accounts receivable: amount owed to business by customers when purchasing on credit.
Merchandise inventory: Unsold merchandise in your inventory.
Equipment: Cost of things like shelving, display racks, other store equipment.
Accumulated depreciation: the portion of the cost of equipment estimated to have been used up in the course of doing business. Depreciation is the practice of spreading the cost of an asset over its expected useful lifespan, not an attempt to account for loss of market value through age or use.
Accounts payable: Amount owed to suppliers for goods bought on credit.
Accrued liabilities: amount owed to creditors, including wages owed to employees.
Short-term debt: amount borrowed that will be repaid within 12 months of the balance sheet's date.
Long-term debt: amount borrowed that will not be repaid within 12 months of the balance sheet's date.
Current assets: Assets which are likely to be converted into cash and used for the business within 12 months.
Current liabilities: Obligations likely to be paid with cash within 12 months.
Income statement / profit and loss / earnings statement / statement of operations = (Revenue - expenses) + (gains - losses.)
Revenue: Cash or assets gained through 'normal' operations of the business.
Expenses: Spent cash or used up assets to complete 'normal' business operations.
Gains: Assets gained through incidental transaction that aren't part of 'normal' operations or invest by owners.
Losses: Decrease in assets due to incidental transactions that aren't part of 'normal' operations or distributions to owners.
Income statement report assets and liabilities for a period of time, not a snapshot of a specific date like a balance sheet.
Net sales - cost of goods sold = gross profit
Gross profit - administrative + operating expenses (wages, depreciation, advertising, etc.) = income from operations
Income from operations - interest paid for loans = before-tax income
Before-tax income - taxes = Net income
Net income divided by number of outstanding shares = earnings per share
Statement of changes in owners' equity / statement of changes in retained earnings / statement of changes in capital stock: has a period of time like an income statement.
Owner's equity = Paid-in capital + (retained earnings = net income - dividends)
Statement of cash flows: used to determine sources and uses of cash during the time period.
Three principal forms of business organization:
Proprietorship: single owner, easy to start, owner is liable for all debts incurred by the business (unlimited liability)
Partnership: A group of proprietors. Unlimited personal liability, unless set up as an LLP (limited liability partnership)
Corporation: Owners = stockholders who are issues stock as evidence of ownership. More complex tax structure compared to proprietorship/partnership. More expensive to form. Can form an LLC (limited liability company) to get some of the benefits of being a corporation without some of the formalities of a corporate structure.
Assets = A
Liabilities = L
Paid-in Capital = PIC
Retained earnings, beginning of period = RE1
Retained earnings, end of period = RE2
Net income for period = NET
Dividends = DIV
A = RE2 + L + PIC
RE2 = A - L - PIC
DIV = RE1 - RE2 + NET
RE2 = RE1 + NET - DIV
RE1 = RE2 - NET + DIV
A - L = OE
OE = PIC + RE
RE = NET - DIV
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