Question 1

Gekok Inc. produces and sells home appliance. To better understand its operations, Gekok collects 60 months of inventory turnover and marketing spending data (January 2016 to December 2020) for analysis. The marketing spending data are the total amount (in $000) the firm spent in marketing its finished goods in a month, and the inventory turnover data are calculated as the cost of goods sold in a month divided by the average on-hand inventory in that month. Data are included in Excel spreadsheet.

(a) Analyse the inventory turnover and marketing spending data. Provide a visualisation and a numerical description of the two variables according to the following requirements:

(i) Select an appropriate chart type to visualise and present data. Provide a brief justification of your choice. What observations and conclusions can you make from the data visualisation? (20 marks)

(ii) Present descriptive statistics of the two variables. Provide a brief explanation of the key statistics. What can you observe and conclude from the descriptive statistics? Are these observations and conclusions consistent with those from (a)(i)? (20 marks)

(b) Inventory is critical asset in a manufacturing company. Increasing inventory turnover can increase the return on asset. It is hypothesised that marketing efforts can help increase inventory turnover. Gekok's management team wants to find out if the hypothesis can be supported by the collected data. You are tasked to perform an association analysis according to the following requirements.

(i) Use an appropriate chart type to examine the relationship between the two variables, inventory turnover and marketing spending. Provide a brief justification of your choice. What can you observe and conclude from the chart? (20 marks)

(ii) Use an appropriate statistical tool to examine the relationship between the two variables. Clearly present the steps and components of the tool (if any), as well as the result of analysis. What can be concluded from the analysis? Is the conclusion consistent with the observations and conclusions in (b)(i)? (30 marks)

(iii) Is it possible to establish a causality between marketing spending and inventory turnover, i.e. marketing spending drives the firm's inventory turnover, based on the conclusion in (b)(i) and (b)(ii)? (10 marks)

Month Inventory Turnover Marketing Spending ($000) Jan-16 1.20 250 Feb-16 1.59 270 Mar-16 1.62 260 Apr-16 1.81 270 May-16 1.98 280 Jun-16 2.04 270 Jul-16 1.75 264 Aug-16 1.63 280 Sep-16 1.30 290 Oct-16 1.20 280 Nov-16 1.06 290 Dec-16 0.93 280 Jan-17 1.20 320 Feb-17 1.52 350 Mar-17 1.67 390 Apr-17 1.77 440 May-17 1.86 470 Jun-17 2.05 490 Jul-17 1.74 481 Aug-17 1.54 460 Sep-17 1.26 460 Oct-17 1.17 440 Nov-17 0.99 436 Dec-17 0.87 420 Jan-18 1.20 510 Feb-18 1.58 590 Mar-18 1.69 610 Apr-18 1.81 600 May-18 1.96 620 Jun-18 2.07 640 Jul-18 1.81 590 Aug-18 1.52 600 Sep-18 1.28 670 Oct-18 1.18 630 Nov-18 1.07 710 Dec-18 0.89 570 Jan-19 1.22 650 Feb-19 1.60 680 Mar-19 1.69 724 Apr-19 1.82 730 May-19 1.95 760 Jun-19 2.02 800 Jul-19 1.82 840 Aug-19 1.56 830 Sep-19 1.31 820 Oct-19 1.20 810 Nov-19 1.05 827 Dec-19 1.08 750 Jan-20 1.24 780 Feb-20 1.61 805 Mar-20 1.71 830 Apr-20 1.82 890 May-20 1.91 930 Jun-20 2.05 980 Jul-20 1.92 1002 Aug-20 1.54 970 Sep-20 1.37 960 Oct-20 1.19 930 Nov-20 1.05 920 Dec-20 0.97 902