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Definition of Mean-variance analysis
Evaluation of risky prospects based on the expected value and variance of possible outcomes.
the process of detailing the various repetitive actions that are performed in making a product or
Arithmetic mean return.
An average of the subperiod returns, calculated by summing the subperiod returns
A method developed by BARRA, a consulting firm in
An analysis of the level of sales at which a project would make zero profit.
analysis of the level of sales at which the company breaks even.
An analytical technique for studying the relationships between fixed cost, variable cost, and profits. A breakeven chart graphically depicts the nature of breakeven analysis. The breakeven point represents the volume of sales at which total costs equal total revenues (that is, profits equal zero).
the difference between total actual overhead
Refers to various techniques and procedures
A statistical technique that identifies clusters of stocks whose returns are highly correlated
The representing of accounting information over multiple years as percentages
A method of analysis in which a firm is compared to others that have a desired
the budget variance of the two variance approach to analyzing overhead variances
an analytical technique that uses statistical
The calculation and comparison of the costs and benefits of a policy or project.
cost-benefit analysis the analytical process of comparing the
relative costs and benefits that result from a specific course
cost driver analysis
the process of investigating, quantifying,
Cost–volume–profit analysis (CVP)
A method for understanding the relationship between revenue, cost and sales volume.
A statistical measure of the degree to which random variables move together.
A measure of the degree to which returns on two assets move in
The process of analyzing information on companies and bond issues in order to estimate the
Procedure to determine the likelihood a customer will pay its bills.
Direct materials mix variance
The variance between the budgeted and actual mixes of
A statistical process that links the probability of default to a specified set of financial ratios.
A statistical procedure that seeks to explain a certain phenomenon, such as the return on a
The examination of failure incidents to identify components
Financial Trend Analysis
Process of analyzing financial statements of a company for any continuing relationship.
fixed overhead spending variance
the difference between the total actual fixed overhead and budgeted fixed overhead;
fixed overhead volume variance
see volume variance
Security analysis that seeks to detect misvalued securities by an analysis of the firm's
Geometric mean return
Also called the time weighted rate of return, a measure of the compounded rate of
An analysis of returns using total return to assess performance over some investment horizon.
The process of dividing each expense item of a given year by the same expense item in
a process of evaluating changes that
labor efficiency variance
the number of hours actually worked minus the standard hours allowed for the production
Labor efficiency variance
The difference between the amount of time that was budgeted
labor mix variance
(actual mix X actual hours X standard rate) - (standard mix X actual hours X standard rate);
labor rate variance
the actual rate (or actual weighted average rate) paid to labor for the period minus the standard rate multiplied by all hours actually worked during the period;
Labor rate variance
The difference between the actual and standard direct labor rates
labor yield variance
(standard mix X actual hours X standard rate) - (standard mix X standard hours X standard rate);
least squares regression analysis
a statistical technique that investigates the association between dependent and independent variables; it determines the line of "best fit" for a set of observations by minimizing the sum of the squares
material mix variance
(actual mix X actual quantity X standard price) - (standard mix X actual quantity X standardprice);
material price variance
total actual cost of material purchased
material quantity variance
(actual quantity X standard price) - (standard quantity allowed standard price);
material yield variance
(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price);
Materials price variance
The difference between the actual and budgeted cost to
Materials quantity variance
The difference between the actual and budgeted quantities
The expected value of a random variable.
a. A number that typifies a set of numbers, such as a geometric mean
Mean of the sample
The arithmetic average; that is, the sum of the observations divided by the number of
The selection of portfolios based on the means and variances of their returns. The
Mean-variance efficient portfolio
Related: Markowitz efficient portfolio
Graph of the lowest possible portfolio variance that is attainable for a given
The portfolio of risky assets with lowest variance.
Multiple-discriminant analysis (MDA)
Statistical technique for distinguishing between two groups on the
the fixed overhead volume variance;
overhead efficiency variance
the difference between total budgeted overhead at actual hours and total budgeted
overhead spending variance
the difference between total actual overhead and total budgeted overhead at actual
a method of ranking the causes of variation
The 80:20 ratio that states that 20% of the variables included in an
Performance attribution analysis
The decomposition of a money manager's performance results to explain
Weighted sum of the covariance and variances of the assets in a portfolio.
Pro forma capital structure analysis
A method of analyzing the impact of alternative capital structure
Production yield variance
The difference between the actual and budgeted proportions
A method of analysing financial reports to interpret trends and make comparisons by using ratios – two numbers, with one generally expressed as a percentage of the other.
A method of relating numbers from the various financial statements to one another in order to get meaningful information for comparison.
The process of using financial ratios, calculated from key accounts
A statistical technique that can be used to estimate relationships between variables.
Statistical analysis techniques that quantify the
Regression toward the mean
The tendency for subsequent observations of a random variable to be closer to its mean.
The use of horizon analysis to project bond total returns under different reinvestment rates
Project analysis given a particular combination of assumptions.
Selling price variance
The difference between the actual and budgeted selling price for
analysis of the effect on a project's profitability due to changes in sales, cost, and so on.
An approach to understanding how changes in one variable of cost–volume–profit analysis are affected by changes in the other variables.
a process of determining the amount of change that must occur in a variable before a different decision would be made
analysis of the effects of changes in sales, costs, and so on, on project profitability.
The covariance between a variable and the lagged value of the variable; the same as
Estimation of the probabilities of different possible outcomes, e.g., from an investment project.
Security analysis that seeks to detect and interpret patterns in past security prices.
total overhead variance
the difference between total actual overhead and total applied overhead; it is the amount of underapplied or overapplied overhead
the difference between total actual cost incurred
variable overhead efficiency variance
the difference between budgeted variable overhead based on actual input activity and variable overhead applied to production
variable overhead spending variance
the difference between total actual variable overhead and the budgeted amount of variable overhead based on actual input activity
A measure of dispersion of a set of data points around their mean value. The mathematical
The weighted average of the squared deviations from the
a difference between an actual and a standard or
The dispersion of a variable. The square of the standard deviation.
Average value of squared deviations from mean. A measure of volatility.
A method of budgetary control that compares actual performance against plan, investigates the causes of the variance and takes corrective action to ensure that targets are achieved.
the process of categorizing the nature (favorable or unfavorable) of the differences between standard and actual costs and determining the reasons for those differences
Variance minimization approach to tracking
An approach to bond indexing that uses historical data to
Specifies the permitted minimum or maximum quantity of securities that can be delivered to
The process of dividing each expense item in the income statement of a given year by net
A financial analysis technique that relates key amounts on the income statement and balance sheet to a 100 percent or base figure for the present and previous year.
a fixed overhead variance that represents
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