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Statistical Terms in Managerial Finance

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Briefly describe: a statistical relation, time series, cross section, least squares, See, r, R-squared, t-value, multicollinearity and serial correlation.

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Please see response attached. I hope this helps and take care.


Hi, Let's look at each of these concepts.

1. Briefly describe: a statistical relation, time series, cross section, least squares, See (what?), r, R-squared, t-value, multicollinearity, serial correlation

(1) A statistical relation -A statistical relation is when two variables vary together. For example, there is a statistic relation (e.g., correlation) between obesity and income level - high-income people are less likely to be obese than are lower income people.One study investigated the "Statistical Relation between Monthly Mean Precipitable Water and Surface-Level Humidity over Global Oceans." This relation is found to be applicable to all major ocean basins and can be used to monitor interannual variability. Boundary-layer thermodynamics of different air masses are suggested as an explanation of some characteristics of this relation. (6)

(2) Time series- A time series is a sequence of observations, which are ordered in time (or space). If observations are made on some phenomenon throughout time, it is most sensible to display the data in the order in which they arose, particularly since successive observations will probably be dependent. Time series are best displayed in a scatter plot. The series value X is plotted on the vertical axis and time t on the horizontal axis. Time is called the independent variable (in this case however, something over which you have little control). There are two kinds of time series data: ...

Solution Summary

This solution briefly describes the following term: a statistical relation, time series, cross section, least squares, r, R-squared, t-value, multicollinearity and serial correlation. Links are provided for further research.

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Managerial Finance I

Profit and Shareholder Wealth Comparison

GE and TYCO International-Financial Infomation attached

1.Common shareholder's equity (total equity less any preferred stock equity)
2.Market Capitalization (total common stock shares outstanding times latest stock price)
3.Net profit margins for each company for the past 3 years.
4.Divide each company's market capitalization by the company's shareholder's equity. This market-to-book ratio provides one measure of shareholders wealth crated by each company. Include calculations.
5.Based on these market-to-book ratios, which company's strategy has provided the greater shareholders wealth creation?
6.Calculate the average net profit margin for each company for the 3 years worth data obtained. Include your calculations. Based on these average net profit margins, which company ha done a better job of maximizing profits?
7.Did the company achieving the greatest profit maximization also achieve the greatest stockholder wealth maximization? If not, which strategy was more beneficial to the shareholders?
8.Which company's strategy has presented grater risk to the shareholders' investment?
9.Have the investors assuming that greater risk been rewarded with grater investment?

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