Why need linear algebra in financial analysis

General understanding

           Indeed we used to apply ratio methods in financial statement analysis. But however many key indices change in opposite directions, some of them hike, others decline, sometmes they deviate as tsunamy waves of ocean. Obviously difficult to make optimal decision of solvency as for common staves of company in that doubtful & changeable situation. Analysts always face to determinate behavior for company in connection with past, present & future periods of development & evolution via working up empiric data applying statistical methods of researching. Uncertainty & natural trend of selected researching object require to applying of multiple discriminant score analysis, Bayes’ theorem, linear algebra & matrices operation. Meanwhile our co-authors primarily & extraordinarily have demonstrated feasibility application of linear algebra conversion in all of cost & management accounting topics. But then we have created several methods to solve pending problems, which led to the same exact answer. In order to give approciate academic understanding of regression approach to learners we issued simplified  handbook entitled “ Multiple discrminant analysis by hand method“, which will be used without applying to computer application program SPSS serials. In addition to that we have managed professional courses for persons who interested in possess of computer application program, SPSS 17.0, in connection with multiple discriminant function analysis by hand, which really rendered pleasant opportunity to improve comparable experience on both methods to learners simultaneously. We emphasize that next goal of association is all-round support & development of economics outsourcing in following field of activities : financial statement preparing & its analyzing, book-keeping, taxation & its payment, paying off debts, delivering & dealing with investment analysis in foreign mining companies. I think very important to possess skills on multiple discrimnant score analysis for commercial banks as which have wide relationship with many clients, & banks often face problems to determine solvency & bankruptcy among their clients.

Analytical geometry & isolation fixed & variable expenses

       Traditionally in isolation of mixed costs into fixed & variable use following methods:

·         High & low point’s method

·         Statistical scattergraph method

·         Method of least squares

In process of researching had been created with us below given methods which lead to the same exact answer:

·         Analytic geometry method

·         Differential calculus method

·         Linear algebra method

·         Gauss method

       To demonstrate efficient application & accuracy of obtained result above mentioned analytic geometry method had been chosen by any chance, however which give the same answer as high & low point’s method.  Here had illustrated only brief abstract of calculation of suggested analytic geometry method. To isolate mixed costs into fixed & variable parties we have cited to well-known geometric understanding of possibility to draw only line through two existing points, mathematical formula of which is as following:   (y – y1) : (y2 - y1) =(x - x1) : (x2 - x1). Where x2 =2600 is high level of labor hour, x1 = 2100 is low level of labor hour, as well as respectively y2 = $1300, y1 = $1100. If  substitute data in table1 to mathematical formula we shall get straitlinear equation y = 260 + 0.4 x. Indeed in this occasion I have used my pupil’s experience on geometry when I studied in secondary school in little village of Gobi desert.

      Assume below given relative data of leasing expenses for 6 months of A company.  Table1

If you wish to acquaint with many unique methods developed & created in line of activities of Mongolian association of chartered financial analysts we kindly as everybody, who really interested in further innovation of financial analyzing, please contact with us via my e- mail address, & enjoy researching papers written by Prof. T.Yondon along with his family members. By the way in order to more acquaint with activities of association we shall recommend to make searching “ ... Mongolian association of chartered financial analysts” on Google.com communication.