Read the article “Apple turns over entire inventory every five days.”1
It is not surprising that, the
success of managing inventory can lead to the success of a firm’s operational performance.
Although we have not talked about the inventory management models, we will first look at real
inventory data to identify some of the important factors that affect a firm’s inventory
performance.
The Excel file of Assignment 5 contains the quarterly information (Q1 to Q4) for more than 250
firms (mostly in the retailer and wholesaler industries, where inventory management is crucial to
firms’ performance) in the fiscal year of 20102
. Most of the variables are fairly straightforward,
except the following ones whose definitions are shown below:
Account Payable = can be approximated to be the trade credit owed to the
firm’s suppliers.
Inventory turnover = how fast a firm turns their inventory into sales
= (cost of goods sold)/(this period and last period’s
inventory average)
Gross Margin = (sales – cost of goods sold)/sales
Capital Intensity = (Gross fixed assets)/( Gross fixed assets + inventory)
Trade Credit Ratio = Account Payable/sales
You may use Excel and turn in the printout as well as the Excel file (by email). You still need to
answer all questions asked in the problem by writing on your printout. For the significance level,
you can test for ?=1%, 5%, and 10%, respectively.
Two inventory performance measures can be used here: the inventory level (Column H) or the
inventory turnover (Column L). First, we investigate the variables that are correlated with the
inventory level.
Hypothesis 1: The inventory level is positively correlated with the assets.
Hypothesis 2: The inventory level is positively correlated with the market value.
Hypothesis 3: The inventory level exhibits a seasonality pattern.
Hypothesis 4: The inventory level is generally higher in Q3 than Q1, Q2, and Q4, after
controlling for the firm size measured by assets.
Hypothesis 5: The inventory level is positively correlated with the natural logarithm of
(Account payable+1) after controlling for the firm size.
Hypothesis 6: The inventory level is positively correlated with Account payable after
controlling for the firm size.
1
http://appleinsider.com/articles/12/05/31/apple_turns_over_entire_inventory_every_five_days
2
See COMPUSTAT for data source.1. Build a regression model to test Hypothesis 1. Does the data support Hypothesis 1? Explain
why.
2. Build a regression model to test Hypothesis 2. Does the data support Hypothesis 2? Explain
why.
3. Build a regression model to jointly test Hypotheses 1 and 2. Does the data support both in
this test? Explain why. Do you observe any issues?
4. Build a regression model to test Hypothesis 3. Does the data support Hypothesis 3? Explain
why.
5. Build a regression model to test Hypothesis 4. Does the data support Hypothesis 4? Explain
why. (Hint: you can “control” an independent variable simply by adding this variable into the
regression model.)
6. Build models to test Hypotheses 5 and 6. Which model is better? Why?
Next, we investigate the variables that are correlated with the inventory turnover.
Hypothesis 7: The inventory turnover is negatively correlated with the gross margin.
Hypothesis 8: The inventory turnover is positively correlated with the capital intensity.
Hypothesis 9: The inventory turnover is negatively correlated with the trade credit to
sales ratio.
7. Build a model to jointly test Hypotheses 7-9, with and without controlling for the firm size
measured by log(asset). Comment on the results and the insights you learn from the
regression model.
also an excel data file

Posted Date: 3/11/2013 8:14:34 AM | Location : Hong Kong

Ask an Expert

Related Discussions:- Regression, Assignment Help, Ask Question on Regression, Get Answer, Expert's Help, Regression Discussions

Write discussion on Regression
Your posts are moderated

Write your message here..

Related Questions

QUANTITATIVE METHODS, KINDLY ASSIST ME WITH THIS ASSIGNMENT AND FORWARD IT ... KINDLY ASSIST ME WITH THIS ASSIGNMENT AND FORWARD IT TO ME BY 31 OCTOBER 2013.

Regression, Regression line drawn as Y =C+1075x, when x was 2, and y was 23... Regression line drawn as Y =C+1075x, when x was 2, and y was 239. Given that y intercept was 11. Calculate the residual.

Applications of linear regression, Linear regression is widely used in bi... Linear regression is widely used in biological behavioral and social sciences to describe relationship between variables. It ranks as one of the most important tools used

6.2, comulativefrequencydistribution comulativefrequencydistribution

Define block grant, Define block grant A federal grant that consolidates, ... Define block grant A federal grant that consolidates, for a wide reason or any type of purpose, funds previously awarded for a wide variety of activities.

Hypotheses testing, Celia is a nurse in a geriatric ward.  She noticed that... Celia is a nurse in a geriatric ward.  She noticed that older persons in her care are having problems sleeping at night.  She decided to introduce non-pharmocologic ways of relaxat

Test the hypothesis, Arnold Palmer and Tiger Woods are two of the best golf... Arnold Palmer and Tiger Woods are two of the best golfers ever to play the game. To show how these two golfers would compare if both were playing at the top of their game, the foll

Calculate - mean, how to calculate mean, median and the range on the follow... how to calculate mean, median and the range on the following data: 15 18 23 22 21 18 14 20 25 12

Conceptual structure of financial, conceptual structure of financial In... conceptual structure of financial In financial accounting, There were many breaks in the conceptual structure of individual forums for example both the forums hadn't conducted

Evaluate the probability, Question 1: (a) 75 percent of all people in a... Question 1: (a) 75 percent of all people in a population are vaccinated against a par-ticular disease. During an epidemic, the probability that a vaccinated person is infected