Average cost-to-income ratio

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Reference no: EM13990407

A company's cost-to-income ratio is a measure of its ability to control its costs. The lower the ratio (expressed as a percentage), the better the cost management is within the company. For a company to remain profitable and attract investment, a rule of thumb exists that states that the company's cost-to-income ratio should be less than 75%.

An investment analyst wished to test this rule of thumb amongst JSE companies, so selected a sample of 50 and recorded their cost-to-income ratios.

Test, at the 5% significance level, whether the average cost-to-income ratio amongst all JSE companies adheres to the rule of thumb. Formulate the null and alternative hypothesis and interpret the findings.

Reference no: EM13990407

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