Assignment 1

SPSS Application

Submitted to

Mohammad Safiqul Islam

Course Instructor (BUS-173) North South University

Submitted by

Sajid Salim
051514030

Submitted on 31st July, 2012

Problem:
The accompanying data is of company X, here y = profit margin in a given year, x1 = net revenues (in million taka) in that year, and x2 = number of branch offices.
y 0.75 0.71 0.66 0.61 0.7 0.72 0.77 0.74 0.9 0.82 0.75 0.77 0.78 x1 3.92 3.61 3.32 3.07 3.06 3.11 3.21 3.26 3.42 3.42 3.45 3.58 3.66 x2 7298 6855 6636 6506 6450 6402 6368 6340 6349 6352 6361 6369 6546 y 0.84 0.79 0.7 0.68 0.72 0.55 0.63 0.56 0.41 0.51 0.47 0.32 x1 3.78 3.82 3.97 4.07 4.25 4.41 4.49 4.7 4.58 4.69 4.71 4.78 x2 6672 6890 7115 7327 7546 7931 8097 8468 8717 8991 9179 9318

a. Identify the dependent and independent variables. b. Find the regression model. c. Interpret the estimates. d. Find the coefficient of the determination (r^2) and interpret it. e. Find the estimate of the regression line [Se(y)] and interpret it. f. Test the population correlation coefficient. g. Test the population regression coefficients.

Solution:
a. Here profit margin is the dependent variable; revenue and number of branch offices are the independent variable. Because the profit margin depends on how much revenue is generated and number of brunches increase sales and thus impacts the profit margin.

b. From SPSS

From the above output, the regression equation is: 1.5645 0.2372x1 - 0.0002491x2 Or Profit margin = 1.5645 0.2372x(revenue) - 0.0002491x(number of branch offices)

c. Here we may state that, if the revenue increases by 1 million taka then the profit margin may increase by 0.2372, given that number of branches remains constant.

Again we may state that, if one more branch is opened then the profit margin may decrease by 0.0025 unit, given that revenue remains the same.

d. From SPSS

The coefficient of multiple determinations is 0.8653; therefore, about 86.53% of the variation in the profit margin is explained by net revenues and number of branch offices but the rest 13.47% remains unexplained.

e. From the SPSS we observed that the standard error of the estimate is 0.05330 so we may state that, for any given value of revenue and number of branch offices 68.8% observation of profit margin may fall within 0.05330 units of 1.5645 0.2372x(revenue) - 0.0002491x(number of branch offices)

f. Hypotheses H0: 0 Ha: 0

Tcal = r/Sr = 0.93/0.766 = 12.1389 Ttab = 2.07

Tcal > Ttab

We may reject the null hypothesis. So we may say that there is a relationship existing between the dependent and independent variables.

g. For revenue, Hypotheses H0 : 10 Ha : 10

Tcal = 4.2693, Ttab = 2.07

Tcal > Ttab

So we may reject the null hypothesis. So at the 0.05 level of significance, there exists enough evidence to conclude that the slope of the net revenue variable is not zero and, hence, that net revenues is useful (with number of branches) as a predictor of profit margin.

For number of branch offices, Hypotheses H0 : 10 Ha : 10

Tcal = 7.7719, Ttab = 2.07

Tcal < Ttab

So we may reject the null hypothesis. So at the 0.05 level of significance, there exists enough evidence to conclude that the slope of the number of branches variable is not zero and, hence, that number of branches is useful (with net revenues) as a predictor of profit margin.