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CHAPTER 9

Quantitative Applications and Modeling in Accounting

Quantitative applications and modeling in accounting have been on the rise, coupled with the advent of microcomputers and the wide availability of software for various quantitative decision-making tools. The accountant should make use of quantitative techniques and modeling to analyze and solve the various accounting and financial problems faced by the client or the business entity he or she is employed by. These quantitative tools allow for the consideration of a multitude of data.

Statistical Analysis and Evaluation

How do I handle large volumes of data?

In many situations, accountants have a large volume of data that needs to be analyzed. These data could be earnings, cash flows, accounts receivable balances, weights of an incoming shipment, and so on. The statistics most commonly used to describe the characteristics of the data are the mean and the standard deviation. These statistics are also used to measure the return and risk in investment and financial decision making, in which the CPA may be asked to participate by the business entity.

Mean

What is a mean?

The mean gives us the average or central value of our data. Typically, there are three measures of central tendency:

1. Arithmetic mean
2. Weighted mean
3. Geometric mean

What is the arithmetic mean ()?

The arithmetic mean is a simple average. To find it, ...

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