Financial Analysis and Forecasting Coursework Example | Topics and Well Written Essays - 1750 words

Financial Analysis and Forecasting - Coursework Exampleanalysis shows that there exist a perfective aspect relationship betwixt sales and assets. The look on of R-square is 1 this shows a perfect relationship that will professional personduce a best-line-of fit that passes through the origin. The proportionality speculation that the value of assets increases proportionally with sales is therefore, fight downs, and is true(p). B) Repeat the part a regression analysis assuming the given data. Under these conditions, does it appear that the proportionality assumption use ups true? Explain. From the results obtained below, the R squared value is 0.906304 this shows a good relationship because the R square value tends to 1, which is usually a perfect relation. SUMMARY OUTPUT reversion Statistics Multiple R 0.952 R Square 0.906304 Adjusted R Square 0.875073 Standard Error 4.495916 Observations 5 ANOVA df SS MS F Significance F Regression 1 586.5602 586.5602 29.01858 0.012533 Residu al 3 60.63978 20.21326 Total 4 647.2 Coefficients Standard Error t Stat P-value Lower 95% pep pill 95% Lower 95.0% Upper 95.0% Intercept -50.9698 16.52736 -3.08396 0.053968 -103.567 1.627654 -103.567 1.62765 X Variable 1 3.246979 0.602756 5.38689 0.012533 1.328741 5.165216 1.328741 5.16522 From the above evaluation, it is clear that the best-line-of fit does not pass through the origin making the assumption not to hold true for sales and assets analyzed. This is because there is no close association between the dependent and independent variables in the study. C) Which of the preceding situations is likely to hold for most firms? What implications does your response have for use of the percentage-of-sales-method? From the above situations, both cases have close range on R-square but the first is preferred most. The first situation is likely to hold for most firms because each firm will try as much as possible to ensure there is a good correlation between sales and assets. Any imbalance on these two variables may lead to collapse of the business because there might be too much outlay in relation to company assets. Such a situation may result because of poor management and control of measures and standards. R is a measure of righteousness of fit. Quantities neighboring 1 show a very suitable good fit. When the firms R is squared, it illustrates the percentage of changeableness of y accounted for by x.In roughly other terms, most firms tend to ensure that their R-Square value stays or should not go below 0.95, as this will account for 95% of the changeability in y with respect to x. In business, usually an R-square values more than 0.9 are preferred, but it is essential to mark that even when a firm has an R-square value of 0.35, this implies that x is still demonstrating a considerable percentage of the y trait. Nevertheless, those below 0.5 are taken as somewhat inadequate for bivariate evaluation, since the related delusion is so wide. Multivariate a nalysis for firms is however, different. In addition, when applying mathematical associations to forecast y given x, then the pact is to present an error = 2 ? SSE, but this resolving power is not often the case. Implications on use of the percentage-of-sales-method Percentage-of-sales-method is an approach of forecasting cash needs by stating revenues and costs as percentage of sales, and from these percentages to develop a pro forma income statement. While predicating financial information