What is 'Descriptive Analytics'

Descriptive analytics is the interpretation of historical data to better understand changes that have happened in a business. Descriptive analytics describes the past using a range of data to draw comparisons. Most commonly reported financial metrics are a product of descriptive analytics, e.g., year-over-year pricing changes, month-over-month sales growth, the number of users, or the total revenue per subscriber. These all describe what has occurred in the business in the time period being measured.

BREAKING DOWN 'Descriptive Analytics'

Descriptive analytics is necessary to make raw data understandable to managers, investors, and other stakeholders. Sales of $1 million may sound impressive, but it lacks context. If that figure represents a 20% month-over-month decline, then it is a concern. If it is a 40% year-over-year increase, then it suggests something is going right with the sales strategy, but it still needs the larger context of what the targeted growth was to fully judge.

Descriptive analytics is meant to provide an accurate picture of what has happened in a business and how that differs from other comparable periods. These performance metrics can be used to flag areas of strength and weakness in order to inform management’s strategy.

Descriptive Analytics and Business Intelligence

Descriptive analytics is one of the most basic pieces of business intelligence a company will use. Although descriptive analytics can be very industry specific — such as the seasonal variation in shipment completion times — many are broadly accepted measures that are used all over finance. Return on invested capital (ROIC) is a descriptive analytic created by taking three data points — net income, dividends and total capital — and turning it into an easy-to-understand percentage that can be used to compare one company’s performance to others. Generally speaking, the larger and more complex a company is, the more descriptive analytics it will use to measure its performance.

Beyond Descriptive Analytics

Descriptive analytics provides important information in an easy-to-grasp format. There will always be a need for descriptive analytics. However, more effort is going towards newer fields of analytics like predictive and prescriptive analytics. These take in all the descriptive analytics and use additional data from diverse sources to model likely outcomes in the near term. These forward-looking analytics go beyond informing to decision making and start suggesting courses of action that can maximize positive outcomes and minimize negative ones.

That said, we are not quite yet at the point where benevolent and prescient computers will helm all major corporations. Right now, the majority of decisions in offices and boardrooms across the world are made by people based off the same types of descriptive analytics they used 10, 20 and 30 years ago, such as whether sales were up or down compared to last month, is the product getting to market on time, and does the company have enough for everybody based on last month’s numbers.

  1. Data Analytics

    Data analytics is the science of drawing insights from raw information ...
  2. Descriptive Billing

    Descriptive Billing is a type of credit card billing that lists ...
  3. Descriptive Statement

    A descriptive statement is a bank statement that lists deposits, ...
  4. Dean Analytic Schedule

    The Dean Analytic Schedule is a method of rating fire insurance ...
  5. Business Intelligence (BI)

    Business intelligence (BI) refers to the procedural and technical ...
  6. Data Science

    Data science is a field of Big Data that seeks to provide meaningful ...
Related Articles
  1. Tech

    Predictive Analytics Drives Return for Investors

    A new industry of predictive analysis has developed to make sense of big data and give investors real-time buy and sell recommendations based on the patterns forming in the data long before traditional ...
  2. Tech

    How Big Data Has Changed Sports

    Big data is transforming sports analytics by helping managers measure individual performance and the most effective game plans.
  3. Tech

    3 Surprising Things That Big Data Reveals About HR

    More and more companies are using big data in HR as a means of saving time and money when recruiting, hiring and retaining workers.
  4. Tech

    Marketing Technology Takes off Due to Funding

    Marketing technology is on fire. According to the latest research, funding for marketing technology neared $3.8 billion in the third quarter of this year.
  5. Tech

    How Big Data Has Changed Healthcare

    Like many other industries, healthcare has adapted to data analytics not only for its financial returns but also improving patient’s quality of life.
  6. Tech

    The Big Play In Big Data

    Given just how technology oriented our lives are becoming, the amount of data we are creating is staggering. But in that staggering amount of zeros and ones, there are opportunities for investors. ...
  7. Investing

    Cisco Touts Advanced Enterprise Security Platform

    Its latest Tetration Analytics software follows the company's $3.7B acquisition of AppDynamics.
  8. Investing

    Global Smartphone Shipments Suffered Biggest Ever Fall Last Quarter

    Neil Mawston, executive director at Strategy Analytics, warned that global iPhone volumes will continue to decline until Apple introduces more affordable alternatives.
  9. Tech

    Nasdaq Building Tool to Predict Crypto Price Movements

    Nasdaq is reportedly working on tools that can be added to its Analytics Hub for predicting future crypto price moves and sentiments
  1. What information does my employer have to give me regarding my 401(k) plan?

    Obtain 401(k) plan information like a summary plan description, summary annual report and annual statement of account information ... Read Answer >>
Trading Center