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Business Economics Essay

951 words - 4 pages

How Controllers use statistics

Statistics and accounting are closely related areas and use of statistics in accounting is increasing with increasing rate. Almost every filed of accounting is utilizing statistics to make effective decisions. Controllers in accounting are professionals which directly deal with financial matters and especially in cost control and budgeting. Controllers use statistics software to analyze and interpret data that helps them to make strategic and short term decisions.

Question#2.a
There are many issues related to controllers while making decisions on the basis of available data. Budget forecasting is very important for controllers because this tool is ...view middle of the document...

The reason for selecting interest rate is that Earning Before Tax (EBT) heavily depends upon this variable.

c.
Growth variable can be defined as the change between two years or months. Trend analysis is based on growth variable which can be found by simple formula which is given below.
Growth = Current – BasedBase
Growth can be positive or negative depends upon the available data. If growth coefficient shows negative sign then it means growth is negative. Positive sign of growth variable shows that growth is positive. Growth variable actually defines the amount of increase or decrease that a particular variable has gained over the year. Data file shows annualized rate of growth for revenues that company have gained over the year (Adrian & Shin, 2011). Growth variable can be absolute amount or in percentage form, in this case growth variable is depicted in percentage. Revenue growth between 2013 and 2014 is reported (-23.04 %) which means that revenue is decreased in 2014 as compared to 2013. Revenue growth between 2012 and 2013 is (34.08%) which means in 2013 company increased revenue by 34.08%. calculation of growth variable is shown below.
Growth = Current – BasedBase
Growth 2014 = $ 4,260,000 – $ 5,535,000 / $ 5,535,000
Growth 2014 = $1,275,000 / $ 5,535,000
Growth 2014 = -23.04 %

Growth 2013 = 5,535,000 – $ 4,128,000 / $ 4,128,000
Growth 2013 = $1,407,000 / $ 4,128,000
Growth 2013 = 34.08 %
We can use growth rate to interpret the performance of the organization because growth rate is used to make decision. Controllers will find the reason that why revenue is decreased in 2014 and will take corrective actions.
Interest payable is liability of the organization and this amount depends upon the interest rate and total long term liability. Controllers deal with financial statements therefore, investigation of interest amount is their responsibility. Sensitivity analysis of financial statements is used by controllers to measure the intensity or sensitivity of different variables (Imai, Keele, & Yamamoto, 2010). Higher...

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