Do you think there is a correlation between CEO salaries and
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I am in a business statistics class and I am having a tremendous challenge in understanding some of the work. Below is a discussion question I have and my answers are due tonight! Can you help me answer all the questions below but in laymen terms to help me grasp the concepts? I dearly would like to understand how to come up with the answer to the 2nd question below too. Can you explain that to me too?
Do you think there is a correlation between CEO salaries and the degree of success of a company? If you were to take a sample of companies with comparable size, market capitalization, and product category, and plot CEO salaries against the net profit of their respective companies, do you expect to find a linear correlation between the two? Explain.
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Solution Summary
Do you think there is a correlation between CEO salaries and the degree of success of a company? If you were to take a sample of companies with comparable size, market capitalization, and product category, and plot CEO salaries against the net profit of their respective companies, do you expect to find a linear correlation between the two? Explain.
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Yes, there is a direct correlation between the salary of the CEO and the general degree of success of a company. The first criteria to establish if how we're measuring the success of a company. The usual ways to measure success are by examining the profitability of a company, including the company's net income, and also looking at how much sales have improved over a certain period, which is usually compared from one accounting period to the next accounting period. We could also use indicators like the amount of free cash flow taken from the numbers off of the Statement of Cash Flows, and various profitability ratios that we could come up with, from the numbers reported on the company's ...
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