FINANCIAL RESEARCH METHODS

Financial Research Methods

Financial Research Methods

Section A

Requirement 1 (See Appendix)

The table of correlation is showing that there is correlation among market to book value, leverage, liquidity and firm's current asset to total assets as the significance value of these variables is less than 0.05. However, in the case of firm size and current liabilities to total asset, there is no correlation among the variables.

Requirement 2

In context of multicollinearity, in the same regression, if all the variables are used as independent variables then the variables which are highly correlated with each other will have multicollinearity among each other; however, the variables which are not correlated will not have multicollinearity that are firm size and current liabilities to total asset.

Requirement 3

The descriptive statistics is presenting the mean, median and standard deviation of the all the variables in the data of 2010 of UK that are used in analyzing the data. The most important values of the table are means and the standard deviation of the variables which are crucial to study as these vales are providing the accuracy of the data which has been gathered from the companies. From the table, it can be observed that the standard deviation of the cash flow as a percentage of sales is high that is 13.48 as compared to the other variables. Moreover, the cash flow as a percentage of sales has the highest mean value among all the variables that is 16.

Statistics

Lev

PROFMARG

MTBV

Size

Liquidity

CF%S

CATAR

CLTAR

EBITDA

N

Valid

175

175

175

175

175

175

175

175

175

Missing

0

0

0

0

0

0

0

0

0

Mean

82.0054

14.8390

3.8483

14.5690

1.0394

16.4831

.3897

.2967

1.0630E6

Median

46.5900

12.5700

2.5400

14.3500

.8400

13.5200

.3700

.2700

1.8990E5

Std. Deviation

1.35951E2

11.52154

5.98025

1.48781

.88228

13.48101

.21562

.16440

3.22397E6

Minimum

-613.77

-36.02

.54

11.16

.00

-22.23

.05

.02

-1100.00

Maximum

1011.54

60.21

61.02

19.13

5.89

89.56

.98

.98

3.14E7

Requirement 4, 5, 6, 7, 8

Model Summaryb

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

Change Statistics

R Square Change

F Change

df1

df2

Sig. F Change

1

.467a

.218

.190

10.36893

.218

7.806

6

168

.000

a. Predictors: (Constant), CLTAR, Lev, Size, Liquidity, MTBV, CATAR

b. Dependent Variable: PROFMARG

ANOVAb

Model

Sum of Squares

df

Mean Square

F

Sig.

1

Regression

5035.334

6

839.222

7.806

.000a

Residual

18062.459

168

107.515

Total

23097.793

174

a. Predictors: (Constant), CLTAR, Lev, Size, Liquidity, MTBV, CATAR

b. Dependent Variable: PROFMARG

The above charts are showing that the significant value of analysis of variance table which is less than 0.05 and the value of R-square is 21.8% that means there is a relationship between the dependent variable and independent variables.

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

t

Sig.

Collinearity Statistics

B

Std. Error

Beta

Tolerance

VIF

1

(Constant)

-7.880

8.964

-.879

.381

Lev

.005

.006

.054

.716

.475

.819

1.221

MTBV

.385

.153

.200

2.525

.012

.742

1.347

Size

1.658

.567

.214

2.924

.004

.868

1.152

Liquidity

3.307

1.070

.253

3.091

.002

.693

1.442

CATAR

-7.819

4.865

-.146

-1.607

.110

.562

1.781

CLTAR

-12.419

7.015

-.177

-1.770

.079

.465

2.153

a. Dependent Variable: PROFMARG

From the above table, it can be understood that there is not too much multi-colinearity between the variables because the values of tolerance and VIF are near to 1 which is a good indication. Moreover, the beta values of the independent variables that are current liabilities to total asset have negative relationship with the operating profit margin; however, there is positive relationship of operating profit margin with the liquidity, size and market to book value.

Model Summaryb

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

Change Statistics

R Square Change

F Change

df1

df2

Sig. F Change

1

.505a

.255

.228

11.84251

.255

9.580

6

168

.000

a. Predictors: (Constant), CLTAR, Lev, Size, Liquidity, MTBV, CATAR

b. Dependent Variable: CF%S

ANOVAb

Model

Sum of Squares

df

Mean Square

F

Sig.

1

Regression

8061.201

6

1343.533

9.580

.000a

Residual

23561.163

168

140.245

Total

31622.364

174

a. Predictors: (Constant), CLTAR, Lev, Size, Liquidity, MTBV, CATAR

b. Dependent Variable: CF%S

The above tables are showing that the significant value of ANOVA table is less than 0.05 which show that the model is significant; and the value of R-square is 25.5% that means there is a relationship between the dependent variable that is the cash flow percentage of sales with the independent ...