Which of situations above is likely to hold for most firms

Assignment Help Risk Management

Reference no: EM132002402

The major assumption inherent in the proportional growth (percentage of sales) method is that all assets increase proportionally with sales. In effect, this means that the regression of each asset account against sales would result in a straight line that passes through the origin. To check on this assumption, used both in the formula and in Table 3, you could run a regression of each asset against sales, using data from Table 1. As a quick check, run a regression of total assets on sales to test the assumption. (Hint: You can use a financial calculator or the Lotus 1-2-3 model, or you can get an approximation from a graph.) Does it appear that the proportionality assumption holds true? Explain. Repeat the part a. Regression analyses assuming the following data: YEAR SALES TOTAL ASSETS 1988 $30.00 $29.40 1989 $42.00 $31.88 1990 $54.59 $37.73 1991 $68.25 $43.08 1992 $88.73 $44.34 Under these conditions, does it appear that the proportionality assumption hold true? Explain. C. Which of the situations above is likely to hold for most firms? What implications does your answer here have for the percentage of sales method?

Reference no: EM132002402

Questions Cloud

Analyze the organizations strategy plan for compliance : The purpose of this project is to analyze and critique an organization based on what is expected within a corporate strategy in regard to social responsibility.

Identify the main factors that considered in classification : Provide a brief description of the company and what it does. In addition, classify the company as pre-conventional, conventional, or post-conventional.

What is the yield on seven-year treasury note : The maturity risk premium is estimated to be 0.05 × (t - 1)%, where t = number of years to maturity. What is the yield on a 7-year Treasury note?

How should iris respond ngo about sam : How should Iris respond Ngo about Sam and How to make a right position for Sam in the company - How you think job rotation is going to work or not

Which of situations above is likely to hold for most firms : Which of the situations above is likely to hold for most firms? What implications does your answer here have for the percentage of sales method?

What makes it possible for this relationship to exist : What makes it possible for this relationship to exist? Has this horizontal relationship benefited the public more than if the relationship did not exist?

What should be the expected spot rate in two years : If the current spot rate is £1=$1.3520, then according to the PPP, what should be the expected spot rate in two years?

Evaluate whether strategy currently used by your industry : Evaluate whether the strategy currently used by your industry, as discussed in previous sections, appears to be sustainable over time.

Why is the relationship structured the way it is : Choose a specific example of a vertical relationship between the federal, a state, and a local government. How well does the relationship seem to function?

User Account

All Pages