Concurrent deviation method, Mathematics

Concurrent Deviation Method

AIM:

            To test relationship between current ratio and return on total assets of X Ltd for the period 2006-11.

NULL HYPOTHESIS (H0):

            There is no significant relationship between current ratio and return on total assets of X ltd for the period 2006-11.

ALTERNATIVE HYPOTHESIS (H1):

            There is no significant relationship between current ratio and return on total assets of X  ltd for the period 2006-11.

YEARS

CURRENT RATIO (X)

DX

RETURN ON TOTAL ASSETS( Y)

DY

DXDY

2005-06

5.01

 

7.02

 

 

2006-07

3.27

-

5.02

-

+

2007-08

3.21

-

7.80

+

-

2008-09

2.65

-

4.88

-

+

2009-10

2.56

-

7.17

+

-

2010-11

3.04

+

9.6

+

+

Total

 

 

 

 

C=3

 

 

 

 

 

 

TABLE NO: 4.2.2 Calculation of correlation co-efficient between current ratio and return on total assets of X Ltd for the Period 2005-11

Concurrent deviation method :

Rc  = ±√±(2C-n)/n

Rc  =  ±√±(2(3)-5)/5

Rc  =  ±√±.2

Rc  =  +0.45

Student's t-distribution:

t   =         r        X      √(n - 2)

         √(1-(r2 ))

t = 0.45/√ (1-(0.45)2 * √ 6-2

t= 1.008

Degree of freedom(dof)        =     n-2

                                             =      6-2

                                             =       4

Level of significance              =      5%

Table value(t4 0.05)              =      2.571

Result:

Since the calculated value of t(1.008) is less than the table value of t(2.571) m, the Null hypothesis is accepted .

Decision:

There is no significant difference between current ratio and return on total assets of X ltd for the period 2006-10.

Posted Date: 2/25/2013 7:50:40 AM | Location : United States







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