Forum replies – finance/statistics (800 words total)

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Statistics Forum #1

 

As stated in my previous discussion, my supervisor uses a spreadsheet called a CEMASTER which allows her to see our credentials like how long we have been with the company, our skills, our wages, our bonuses, and what training we need to advance. A confidence interval gives an estimated range of values which could include an unknown population parameter. If my supervisor were to add confidence intervals this would give her a percentage probability that an estimated range of possible values includes the actual value that is being estimated. For example, she could use this information when its time to evaluate if we are eligible for our yearly raises. 

 

Statistics Forum #2

 

After reviewing my pervious example on estimates I can understand why people do not entirely trust single point estimates. Our book states that “The confidence interval of the population mean is a range within which the value of an unknown population mean has a specified probability of occurring (Tanner & Youssef-Morgan, 2013).By adding confidence intervals we are able to narrow the number down. I asked a manager in human resource who keeps of the schedule to include  time off, sick day, and no shows if she would prefer a signal point estimate or a range . She told me that she would prefer the range estimate. She agreed with our text witch states “a range of numbers within which the true percentage of spoilage will occur with a stated probability” (Tanner & Youssef-Morgan, 2013). I also asked another person in the HR office and he thought the range estimate was also a better idea. They both felt that the numbers where better and more reliable for their job. They stated that when dealing with a large employee population it would be better to get a range that encompasses the possibilities in numbers.

 

Statistics Forum #3

 

Chi – Tests are also called distribution – free tests and no assumptions are needed about how the data are distributed and there are no requirements regarding their scale. I think a good example of a chi – test would be how your grades have changed over the course of a year. You would compare last year results to this year results. The results would tell you whether your grades improved over a years time.

Statistics Forum #4

Our book states that “chi-square is a test of the independence of two nominal scale variables” (Tanner & Youssef-Morgan, 2013). I would have used the chi-square test when purchasing a new car. There are difference in overall cost to consider. To include the sticker price, taxes, the mpg and general repair the car would need in its first few years. “Chi-square is a statistical test commonly used to compare observed data with data we would expect to obtain according to a specific hypothesis” (Pennsylvania State University, 2013). I could get a better understanding on the overall cost on car ownership.

 

Finance Forum #1

 

Management should at least know the basics of finance, whatever company it may be  or who they are working for. They should know valuation, cash flow and risks. Valuation is the ability to accurately estimate what an asset is worth in “economic terms”. Cash flow is just he money coming in and out, ensuring that there is more positive cash flow then negative. Risk is just how it sounds and when talking about return on investments (ROI) there is always risks when investing in a product for the company.Managers need to understand these characteristics of financial markets because they are vital to operating effectively. They need to know how risky something is to know what kind of value it can bring to the company and to know if it is worth the risk. Cash flow is more important because it is all of the money that comes into and out of the company, not just the money made from sales. It gives a more accurate figure on how much money a company has in hand. If management does not fulfill its responsibilities it could be losing the company money or it could lead to legal problems if they are not following all laws associated with finances.

 

Finance Forum #2

 

Finance is a business function that uses analytical tools to help managers make better overall decisions.  Every management within an organization must know at least the basic financial principles to effectively run their organization.  Management must have a clear understanding of the organization’s current financial position, particularly whether the business is profitable or not.  Management that has a clear understanding of finances within an organization can better provide financial planning to help them guide their business down the right path to future growth.  Managers need to understand the characteristics and importance of financial markets because when they invest, they have to make choices about what to do with their companies’ financial assets.  Risk is any uncertainty with respect to a company’s investment that has the potential to negatively affect the company’s financial welfare.  For example, your investment value might rise or fall because of market conditions.  Corporate decisions, such as whether to expand into a new area of business or merge with another company, can affect the value of your investments.  Cash flow is the amount of money coming into a business and the amount of money going out.  Every business of course wants more money coming in than going out.  Cash flow is more important than sales in a business because it is the lifeblood of your business and comes from sources like payments from customers, receipt of a loan or interest on savings or investments.  Cash is very important because it is the payment for things that make your business run; expenses like stock or raw materials, employees, rent and other operating expenses.  If management doesn’t fulfill their responsibilities they could possibly lose their business.  I used to work for a small business in South Carolina and it had to close down because of very poor management skills.  The manager lacked the skills of finance and keeping an accurate inventory of supplies.  She lacked the financial planning that would ensure the success of her business. 

 

Finance Forum #3

 

The income statements is the financial document that I have chosen and according to our text “The income statement shows a company’s revues and profits over some time period, usually a year or a quarter” (Hickman, 2013). The income statements is detrimental to determining the health of the company. This statements begins by listing the revenues from the sales of the business. Then it lists the cost of making the products, also known as Cost of Goods Sold. This list allows the company to see if they are making a direct profit from their sales. If the cost of goods sold outweighed the revenue, then that would not be good for the business, which is why the income statement comes in handy for a business. Since the income statements is used over a time period, the company is able to see its exact growth over the time period. For example if a company were to do an income statement and see in 2014 their revenues were $79,000 and in 2015 their revenues were $97,000, the company can tell by looking at the income statement that they have increased revenues and in this aspect the business is in a healthy state.

 

Finance Forum #4

 

Choose one of the financial statements and explain how a manager would use the statement to drive financial analysis and decision-making.
I chose cash flow. Cash flow is extremely important to the business owner because it gives the owner a tool by which they can see just where their money is going and where it’s coming from. They are able to plan payments of debts and things of that nature a little bit, rather that finding themselves just paying things without any planning and then finding that they don’t have adequate cash resources with which to pay their debts (Intelecom, n.d.). For an example, if we have a firm with $80,000 in taxable income with no depreciation. Next, we compared this to the firm’s after-tax cash flow assuming it had $20,000 in depreciation expense. In the meantime, we must remember that because depreciation is a non cash flow expense, it must be added back into net income in order to get an estimate of after-tax cash flow because cash is a better measure of the amount of available funds that the firm generates, it is a more reliable indicator than net income of the firm’s ability to pay its bills, make its interest payments on debt and pay dividends to its stockholders. Moreover, these are exactly the attributes that business owners value. However, this causes the asset to be higher as its ability generates cash flow increases.

 

 

 

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