Assets and sales, part 2.

A business analyst was interested in the relationship between a company’s assets and its sales. She collected data (in millions of dollars) from a random sample of 79 Fortune 500 companies and created the following regression analysis. Economists commonly take the logarithm of these variables to make the relationship more nearly linear, and she did too. (These are base 10 logs.) The dependent variable is LogSales. The assumptions for regression inference appeared to be satisfied.

a) Is there a significant linear association between LogAssets and LogSales? Find the t-value and P-value to test an appropriate hypothesis and state your conclusion in context.

b) Do you think that a company’s assets serve as a useful predictor of their sales?

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Dependent variable is: LogSales R squared = 33.9% s=0.4278 with 79-2-77 degrees of freedom Variable Coefficient SE (Coeff) t-ratio P-value Intercept 1.303 0.3211 4.06 0.0001 LogAssets 0.578 0.0919 6.28 0.0001