Posted by: lcowie | November 24, 2008

Math Tools Ch. 2

Abridged Math Tools for Journalists – Chapter Two

by Lesley Cowie

Polls and surveys are vital for gauging public opinion. It is the journalist’s responsibility to explain the validity and results of these polls and surveys to the audiences that review them.

pollsandsurveysIt would be impossible to survey every person in the world. This is why pollsters use samples. Generally pollsters aim for at least 400 interviews to keep the margin of error within acceptable limits.

There are a variety of ways to select a sample. These methods may include, but are not limited to, the following: by census, cluster sampling (such as by zip code), multistage sampling, systematic random sampling, quota sampling and probability sampling.

The margin of error indicates the degree of accuracy based on research of the standard norms. Margin of error is expressed in percentage and is based on the sample size.

Confidence level is a little more complicated than margin of error, but it also indicates a level of accuracy. This is the level of confidence that a researcher has in the results of his or her research.

The confidence level is usually determined in advance and is at a level of 90 percent, 95 percent or 98 percent. To have a 95 percent confidence level means that 5 percent of the results may have occurred by chance.

The confidence level should always be included in a story because it gives readers an opportunity to assess the results themselves.

Z scores and t scores give journalists a better understanding of the research that they obtain. Z scores, also called standard scores, show approximately how much a particular score differs from the standard mean.

The standard deviation is the unit of measure for a z score. Therefore, the mean becomes 0, and the first standard deviation is 1, the second is 2 and so on.

T scores, also called a student’s t-distribution, are similar to z scores. They are used when the sample size is small, roughly 100 or fewer. Because t scores have somewhat of a complicated process of determination, standard text books include critical t scores for review.

Buying into the business side of numbers

Business news often contains the most numbers out of any kind of story because businesses have press release, quarterly earnings reports and annual reports.

Many people are familiar with financial statements. These are formal documents available to shareholders, regulatory agencies and other stakeholders interested in a company’s performance. These statements often include some type of profit and loss report.

Simply put, the profit and loss report shows whether or not a company is making money. Companies determine their profits by subtracting expenses from income.

Businesses have many different expenses. The “cost of goods sold” refers to the direct expense made by a company when it makes or buys a product. The “wholesale” cost refers to when a company buys finished product for resale.

The difference between the “cost of goods sold” and the selling price is the gross margin. The gross margin is often called the mark up.

EBITDA, or the “earnings before interest, taxes, depreciation and amortization,” shows how much money thech6examples company had to operate with. The EBITDA is often called the operational cash flow.

A balance sheet is a written financial statement of a company’s assets, liabilities, and equity. The balance sheet shows the financial stability of the company. It is important to note that the assets side of the balance sheet must always equal the liabilities and equity side. A complete balance sheet generally includes 18 different terms, from accrued liabilities to retained earnings. It is important for journalists covering the business beat to understand what these terms mean.

Ratios evaluate a company’s cash situation, profitability, operating efficiency and market value. There are seven different kinds of ratios.

The most common ratio is the current ratio. The current ratio is a liquidity ratio that measures the ability of a company to meet its liabilities. It can be determined by dividing the current liabilities into the current assets.

Businesses raise money through stocks and bonds. When writing about businesses, journalists should pay attention to the stocks and bonds, in order to determine how well the business is doing.

Corporations sell stocks to raise money, and people buy stocks as investments. When someone buys a share of stock in a company, he or she becomes part owner of the company. However, because so many people purchase shares, each person owns a very small portion of the company.

A bond is a loan from an investor to the government or other organization selling the bond. Bonds earn interest at a set rate and are generally low-risk investments. The “face value” of the bond is the price at which someone first purchases the bond.

ch7exThe value of the bond fluctuates with supply and demand. Therefore, the current yield, or the return on the investment, fluctuates too. To determine the current yield, multiply the interest rate by the face value. Then, divide the price into the multiplied value.

Living, breathing, and using numbers

Property taxes are the largest single source of income for local government, school districts and other municipal organizations. They pay for supplies, salaries and maintenance costs. The tax rate for property is determined by taking the total amount of money the governing body needs and dividing that among the property owners in that taxing district. The ultimate price that the property owner pays depends on the value of his or her property. In this case, property usually includes only real property, which is real estate, homes and buildings.

An appraisal value is based on the property’s use, property’s characteristics, current market conditions and a visual inspection of the property by a trained appraiser.

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