(Financial Data) Flashcards

What is the primary purpose of an audit trail in financial data systems?

Answer: To provide a chronological record of all changes to financial data for accountability and compliance

An audit trail logs every insert, update, and delete action with timestamps and user identifiers, supporting regulatory compliance and fraud detection.

In portfolio analytics, what does 'alpha' represent?

Answer: Excess return of an investment relative to a benchmark index

Alpha measures the active return on an investment above or below a benchmark, representing the value added by the portfolio manager.

Which data quality dimension is most critical when integrating real-time market tick data for algorithmic trading?

Answer: Timeliness

In algorithmic trading, stale or delayed tick data can lead to incorrect signals and costly trading errors, making timeliness paramount.

What is 'goodwill' in financial data, and when does it appear on a balance sheet?

Answer: The excess purchase price paid over the fair value of net identifiable assets in an acquisition

Goodwill arises in a business combination when the acquirer pays more than the fair value of the target's identifiable net assets.

A CDP professional is asked to calculate 'Days Sales Outstanding (DSO)'. Which formula is correct?

Answer: (Accounts Receivable / Net Credit Sales) × Number of Days

DSO measures the average number of days a company takes to collect payment after a sale, calculated as AR divided by daily credit sales.

When working with financial data under IFRS 9, what is the expected credit loss (ECL) model used for?

Answer: Estimating and provisioning for probable future credit losses on financial assets

IFRS 9's ECL model requires financial institutions to recognize credit loss provisions based on forward-looking expected losses rather than incurred losses.

In financial data lineage tracking, which practice best supports regulatory reporting accountability?

Answer: Documenting the transformation steps, source systems, and business rules applied to each reported data element

Data lineage documents the origin and all transformations of each data element, enabling regulators to trace reported figures back to source transactions.