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Quantitative Analysis

Quantitative analysis involves collecting and evaluating measurable data to understand business performance, utilizing techniques such as regression analysis, linear programming, and data mining. Physical models represent objects visually and can be tested for performance, while schematic models provide abstract representations of concepts. The principle of garbage in, garbage out (GIGO) emphasizes that the quality of output is determined by the quality of input in any system.

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6 views4 pages

Quantitative Analysis

Quantitative analysis involves collecting and evaluating measurable data to understand business performance, utilizing techniques such as regression analysis, linear programming, and data mining. Physical models represent objects visually and can be tested for performance, while schematic models provide abstract representations of concepts. The principle of garbage in, garbage out (GIGO) emphasizes that the quality of output is determined by the quality of input in any system.

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tricologe
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What is Quantitative Analysis?

Quantitative analysis is the process of collecting and evaluating measurable and


verifiable data such as revenues, market share, and wages in order to understand the
behavior and performance of a business.

A quantitative analyst’s main task is to present a given hypothetical situation in terms of


numerical values. Quantitative analysis helps in evaluating performance, assessing
financial instruments, and making predictions. It encompasses three main techniques of
measuring data: regression analysis, linear programming, and data mining.

Quantitative Analysis Techniques

1. Regression Analysis

Regression analysis is a common technique that is not only employed by


business owners but also by statisticians and economists. It involves using statistical
equations to predict or estimate the impact of one variable on another. For instance,
regression analysis can determine how interest rates affect consumers’ behavior
regarding asset investment. One other core application of regression analysis is
establishing the effect of education and work experience on employees’ annual
earnings.

In the business sector, owners can use regression analysis to determine the
impact of advertising expenses on business profits. Using this approach, a business
owner can establish a positive or negative correlation between two variables.

2. Linear Programming

Most companies occasionally encounter a shortage of resources such as facility


space, production machinery, and labor. In such situations, company managers must
find ways to allocate resources effectively. Linear programming is a quantitative method
that determines how to achieve such an optimal solution. It is also used to determine
how a company can make optimal profits and reduce its operating costs, subject to a
given set of constraints, such as labor.
3. Data Mining

Data mining is a combination of computer programming skills and statistical


methods. The popularity of data mining continues to grow in parallel with the increase in
the quantity and size of available data sets. Data mining techniques are used to
evaluate very large sets of data to find patterns or correlations concealed within them.

PHYSICAL MODELS.
Physical models are the ones that look like the finished object they represent.
Iconic models are exact or extremely similar replicas of the object being modeled.
Model airplanes, cars, ships, and even models of comic book super-heroes look exactly
like their counterpart but in a much smaller scale. Scale models of municipal buildings,
shopping centers, and property developments such as subdivisions, homes, and office
complexes all hopefully look exactly as the "real thing" will look when it is built. The
advantage here is the models' correspondence with the reality of appearance. In other
words, the model user can tell exactly what the proposed object will look like, in three
dimensions, before making a major investment.

In addition to looking like the object they represent, some models perform as
their counterparts would. This allows experiments to be conducted on the model to see
how it might perform under actual operating conditions. Scale models of airplanes can
be tested in wind tunnels to determine aerodynamic properties and the effects of air
turbulence on their outer surfaces. Model automobiles can be exposed to similar tests to
evaluate how wind resistance affects such variables as handling and gas mileage.
Models of bridges and dams can be subjected to multiple levels of stress from wind,
heat, cold, and other sources in order to test such variables as endurance and safety. A
scale model that behaves in a manner that is similar to the "real thing" is far less
expensive to create and test than its actual counterpart. These types of models often
are referred to as prototypes.

Additionally, some physical models may not look exactly like their object of
representation but are close enough to provide some utility. Many modern art statues
represent some object of reality, but are so different that many people cannot clearly
distinguish the object they represent. These are known as analog models. An example
is the use of cardboard cutouts to represent the machinery being utilized within a
manufacturing facility. This allows planners to move the shapes around enough to
determine an optimal plant layout.

SCHEMATIC MODELS.
Schematic models are more abstract than physical models. While they do have
some visual correspondence with reality, they look much less like the physical reality
they represent. Graphs and charts are schematic models that provide pictorial
representations of mathematical relationships. Plotting a line on a graph indicates a
mathematical linear relationship between two variables. Two such lines can meet at one
exact location on a graph to indicate the break-even point, for instance. Pie charts, bar
charts, and histograms can all model some real situation, but really bear no physical
resemblance to anything.

Diagrams, drawings, and blueprints also are versions of schematic models.


These are pictorial representations of conceptual relationships. This means that the
model depicts a concept such as chronology or sequence. A flow chart describing a
computer program is a good example. The precedence diagrams used in project
management or in assembly-line balancing show the sequence of activities that must be
maintained in order to achieve a desired result.

What is garbage in, garbage out (GIGO)?


Garbage in, garbage out, or GIGO, refers to the idea that in any system, the
quality of output is determined by the quality of the input. For example, if a mathematical
equation is improperly stated, the answer is unlikely to be correct. Similarly, if incorrect
data is used as input into a computer program, the output is unlikely to be correct or
informative.

GIGO simply means that the output a system produces depends on the
input it receives. If you put garbage in, chances are high that you will get garbage out.
This fact holds even if the program's logic is accurate. Thus, while logic is important, the
correct input is equally – if not more – important to generate the correct and useful
output.
The idea of GIGO is commonly used in mathematics and computer science,
particularly in software development. However, it can be extended to any decision-
making system or process where precise, accurate data is essential to generate correct
results that can be used to make the right decisions.

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