IIBA IIBA Certifications CBDA Questions & Answers

• Question 31:

  An insurance company would like to develop a range of insurance products for different types of customers. The analytics team is asked to conduct some research and share their insights with senior management. Which technique would be useful to divide the customer base into groups?

  A. Linear regression

  B. Survey sampling

  C. Factor analysis

  D. K-means clustering

  Correct Answer: D

  K-means clustering is a technique that partitions a set of data points into a predefined number of clusters, based on their similarity or distance. This technique can be useful to divide the customer base into groups that have similar characteristics, preferences, or behaviors, and then design insurance products that cater to each group's needs and expectations. K-means clustering can also help identify outliers or anomalies in the customer data that may require further investigation or attention.

  References: Guide to Business Data Analytics, page 58-59; CBDA lueprint, page 7; [Introduction to Business Data Analytics: A Practitioner View], page 17.

• Question 32:

  A 3rd party is marketing an application for financial institutions to use for credit scoring. This application is an example of what type of analytics?

  A. Descriptive analytics

  B. Prescriptive analytics

  C. Exploratory

  D. Inferential

  Correct Answer: B

  Prescriptive analytics is the type of analytics that provides recommendations or suggestions for optimal actions or decisions based on data analysis. Prescriptive analytics uses techniques such as optimization, simulation, and decision analysis to generate and evaluate various scenarios and outcomes. Prescriptive analytics can help financial institutions to use credit scoring to determine the best loan offers, interest rates, and repayment terms for their customers, as well as to manage risk and compliance. Prescriptive analytics is the most advanced and complex type of analytics, as it requires a high level of data quality, integration, and modeling, as well as human judgment and domain expertise.

• Question 33:

  The analytics team has completed their analytics work and have agreed on a set of five key recommendations. They are now discussing how best to communicate these recommendations to the finance, customer service, and marketing teams. Recognizing that this is a diverse set of stakeholders, the business analysis professional reminds the team:

  A. All stakeholders should receive information about the recommendation in the same way

  B. Stakeholders only have the ability to understand summarized recommendations

  C. Recommendations are important and must be communicated with as much detail as possible

  D. The recommendation should be communicated in different ways for different stakeholders

  Correct Answer: D

  According to the Guide to Business Data Analytics, the recommendation is the output of the data analysis that provides suggestions or guidance for actions or decisions based on the data insights. The recommendation should be

  communicated in different ways for different stakeholders, depending on their needs, preferences, and expectations. The communication should consider the following factors:

  The level of detail and complexity: Some stakeholders may require more or less detail and complexity in the recommendation, depending on their role, responsibility, and involvement in the data analysis project. For example, the finance team

  may need more detail and complexity than the customer service team, as they are more concerned with the financial implications and feasibility of the recommendation.

  The format and medium: Some stakeholders may prefer different formats and mediums for receiving the recommendation, depending on their availability, accessibility, and learning style. For example, the marketing team may prefer a visual

  and interactive format, such as a dashboard or a presentation, than a textual and static format, such as a report or a document.

  The tone and language: Some stakeholders may respond better to different tones and languages for the recommendation, depending on their culture, background, and personality. For example, some stakeholders may appreciate a formal

  and professional tone and language, while others may prefer a casual and friendly tone and language.

  The communication should also follow the principles of clarity, accuracy, relevance, and timeliness, as well as adhere to the ethical and legal standards for data privacy and security.

• Question 34:

  A toy manufacturing company wants to improve operational efficiencies as a means of reducing costs. The Operational Manager wants an analytics study to identify areas of improvement within their operational processes. During a meeting with the analyst, the Operational Manager mentions concerns about old machinery and suggests this be the area of focus for the study. They can have a touchpoint in three weeks to assess progress. Has the Operational Manager limited the potential of this study?

  A. By providing the focus area of the study, the Operational Manager has limited the scope of the study with their biased opinion

  B. The Operational Manager is the expert, so there is no problem in the manager providing guidance to the analyst

  C. The Operational Manager has limited the scope of the budget by providing a timeline of three weeks

  D. Since the study is being funded by the Operational Manager, providing the focus areas helps the analyst stay on track with time and budget

  Correct Answer: A

  According to the Guide to Business Data Analytics, one of the key competencies of a business data analyst is to identify the research questions that guide the analytics work1. The research questions should be based on the business problem or opportunity, the stakeholder needs, and the data availability and quality2. By providing the focus area of the study, the Operational Manager has limited the scope of the study with their biased opinion, as they have not considered other possible factors that might affect theoperational efficiencies, such as demand, inventory, quality, labor, or customer satisfaction. The Operational Manager has also not involved other stakeholders who might have different perspectives or interests in the study. This could lead to a narrow or incomplete analysis that might miss some important insights or recommendations. The Operational Manager should instead collaborate with the analyst to define the research questions that are relevant, specific, measurable, achievable, and time-bound3.

  The other options are not correct, as they do not address the issue of defining the research questions. The Operational Manager is not necessarily the expert on the operational processes, as they might have a limited or biased view of the situation. The Operational Manager has not limited the scope of the budget by providing a timeline of three weeks, as this is a reasonable time frame for an analytics study, depending on the complexity and availability of the data. The Operational Manager has not helped the analyst stay on track with time and budget by providing the focus areas, as this might actually waste time and resources if the focus areas are not aligned with the actual business problem or opportunity.

• Question 35:

  The finance manager has reported that customers are taking much longer to remit payments this year than last. They would like help in finding a solution to address the situation. One suggestion was to offer a 10% discount to entice customers to pay their invoices in full within the first 30 days. Before offering the discount, the finance manager would like the analytics team to do some research to determine if there is value in addressing the accounts receivable problem. Which of the following is a valid question to ask in this situation?

  A. Have discounts been offered before?

  B. Are sales decreasing when accounts receivables are increasing?

  C. How does credit score impact the customer's ability to pay?

  D. Should the discount offered be set at 10% or 15%?

  Correct Answer: A

  According to the Guide to Business Data Analytics, one of the steps in conducting business data analytics is to identify the research questions that will guide the analysis and help answer the business problem or opportunity. The research questions should be relevant, specific, measurable, achievable, and testable. In this situation, the business problem is the delay in customer payments and the potential solution is to offer a discount. A valid question to ask in this situation is whether discounts have been offered before, and if so, what was the effect on customer behavior and profitability. This question is relevant because it can help assess the feasibility and effectiveness of the proposed solution. It is also specific, measurable, achievable, and testable, as it can be answered by collecting and analyzing historical data on customer payments and discounts..

• Question 36:

  The following boxplot is produced from a dataset. From this boxplot which of the following conclusions can be drawn?

  

  Year-over-Year Sales

  A. The medians and the inter-quartile range is the same in each group

  B. The medians and the inter-quartile ranges are different in each group

  C. The medians are the same but the inter-quartile ranges are not

  D. The inter-quartile ranges are the same but the medians are not

  Correct Answer: B

  According to the Guide to Business Data Analytics, a boxplot is used to provide a visual summary of one or more groups of data values through their quartiles. In this case, the boxplot shows two different years, 2017 and 2018, with distinct medians and interquartile ranges. The median is represented by the line inside the box, while the interquartile range is represented by the height of the box itself. Outliers are marked with circles above and below the box. From the boxplot, we can see that the median sales for 2018 are higher than the median sales for 2017, and the interquartile range for 2018 is narrower than the interquartile range for 2017. This means that the sales for 2018 are more concentrated around the median and have less variability than the sales for 2017. Therefore, the correct answer is B.

• Question 37:

  A fashion retailer is developing a new line of luxury handbags and would like to evaluate their target market and pricing. After an extensive evaluation based on product features, their target market, and pricing of competitor products, the analytics team has come up with a pricing proposal. On presenting the results, the management team is of the opinion that additional analysis was required before making a decision. What type of additional analysis will help the management team make a decision on pricing?

  A. How diverse are the competitors- product portfolios?

  B. How can we broaden the target market?

  C. How can costs be reduced to improve the profit margin?

  D. What is the breakeven point before profits are generated?

  Correct Answer: D

  According to the Introduction to Business Data Analytics: A Practitioner View, the breakeven point is the point at which the total revenue equals the total cost of a product or service. The breakeven point indicates the minimum sales volume or price required to cover the fixed and variable costs and to start making a profit. The breakeven point can help the management team make a decision on pricing by showing them how sensitive the profitability is to the price changes and how much margin of safety they have. The breakeven point can also help the management team evaluate the feasibility and risk of the pricing proposal and compare it with alternative scenarios.

• Question 38:

  A consumer products company gained popularity with increased growth and brand recognition with one of its products. Although they have a loyal customer base and past year's performance results have shown steady growth, the Senior Leadership team wants to keep product leadership as their primary strategic priority.What would be their primary goal?

  A. Focus on providing value to customers by offering innovative and leading edge products

  B. Focus on their other products/product lines so that they gain momentum in popularity as well

  C. Maintain operational efficiencies so that their products can continue to be competitively priced

  D. Ensure that their top product continues to gain market share and maintain high standards

  Correct Answer: A

  According to the IIBA's Introduction to Business Data Analytics: An Organizational View, product leadership is one of the three generic strategies that an organization can pursue to achieve competitive advantage in its market. Product leadership means that the organization focuses on providing value to customers by offering innovative and leading edge products that are superior in quality, design, functionality, or features than those of the competitors1. Product leadership requires the organization to invest in research and development, to foster a culture of creativity and experimentation, to embrace change and risk, and to leverage data and analytics to generate new ideas, test hypotheses, and measure outcomes2. Therefore, if the Senior Leadership team wants to keep product leadership as their primary strategic priority, their primary goal would be to focus on providing value to customers by offering innovative and leading edge products.

• Question 39:

  When reviewing the results of their analysis, the team is determining if the data supports their hypothesis and can be presented to decision makers. They are reviewing measures of variation, sample size and statistical significance. They realize that the p-value of 0.02 is lower than the initial target.This clearly indicates the team can:

  A. Accept the null hypothesis and accept the alternative

  B. Accept the null hypothesis and reject the alternative

  C. Reject the null hypothesis in favor of the alternative

  D. Reject the null hypothesis and reject the alternative

  Correct Answer: C

  According to the Guide to Business Data Analytics, a p-value is the probability of obtaining a test statistic at least as extreme as the one observed, assuming that the null hypothesis is true. A p-value is used to make conclusions in hypothesis testing by comparing it to a significance level, which is the maximum probability of making a type I error (rejecting the null hypothesis when it is true). If the p-value is less than or equal to the significance level, then there is strong evidence against the null hypothesis and it is rejected in favor of the alternative hypothesis. If the p-value is greater than the significance level, then there is weak evidence against the null hypothesis and it is not rejected. In this situation, the team realizes that the p-value of 0.02 is lower than the initial target, which means that the probability of observing such a result under the null hypothesis is very low. This clearly indicates that the team can reject the null hypothesis in favor of the alternative hypothesis, as there is sufficient evidence to support their hypothesis.

• Question 40:

  A marketing department has established an analytics team. The analytics practice is stand-alone and analysts have limited insights into corporate strategy. Which is an expected result for analytics practices operating at the business unit level?

  A. Analytics work will be driven by the organization's business plan

  B. Insights derived from data analysis will be used to guide strategic decisions

  C. The analytics team may conduct analysis that is of minimal value to the organization

  D. The organization will use analytics as a means to obtain a competitive advantage

  Correct Answer: C

  According to the IIBA?Guide to Business Data Analytics, analytics practices operating at the business unit level are characterized by a lack of alignment with the organization's strategic objectives, a limited scope of analysis, and a siloed approach to data and insights1. This can result in analytics work that is not relevant, timely, or impactful for the organization as a whole, and that may not address the most critical business problems or opportunities. Therefore, the analytics team may conduct analysis that is of minimal value to the organization, or even detrimental if it leads to suboptimal decisions or actions.