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Glossary

Variance Reporting

Variance reporting is a financial analysis method used to compare and evaluate the differences between planned or budgeted figures and actual results.

Understanding variance reporting

Variance reporting refers to the process of determining and presenting the contrast between projected and actual outcomes concerning specific financial measures. This data aids in evaluating a company's financial performance and pinpointing areas that require enhancement. The reporting can be conducted either departmentally or holistically for the entire organization.

Calculating variance: a breakdown

Variance serves as a metric indicating the extent to which a dataset's points deviate from their average value. The calculation involves finding the variance between each data point and the mean, squaring these values, and then dividing by the total number of data points. This computation provides insight into the data's distribution. A higher variance suggests greater data dispersion, while a lower variance signifies a more concentrated data distribution around the mean. This knowledge is crucial when analyzing financial models, assisting in evaluating the risk associated with specific investments.