Financial modelling terms explained

Variance Reporting

Variance analysis is a powerful tool for managing businesses. In essence, it's the process of identifying and quantifying cost and revenue variances.

What Is Variance Reporting?

Variance reporting is the calculation and presentation of the difference between budgeted and actual results for specific financial metrics. This information can be used to assess a company's financial performance and to identify areas where improvements can be made. Variance reporting can be done on a department-by-department basis, or for the entire company.

How Do You Calculate Variance?

Variance is a measure of how dispersed a set of data points are around their mean value. It is calculated by taking the difference between each data point and the mean, squaring these values, and then dividing by the number of data points. This gives you a measure of how spread out the data is. A higher variance indicates that the data is more spread out, while a lower variance indicates that the data is more clustered around the mean. This can be important to know when modelling financial data, as it can help you to determine how risky a particular investment is.

Get started today with Causal

Start building your own custom financial models, in minutes not days.