- 10 Marks
QTB – Nov 2015 – L1 – SB – Q5b – Statistics
Calculate Pearson’s correlation coefficient between company expenditure and income over eight years and interpret the result.
Question
An auditing firm is carrying out an analytical review of the financial transactions of its client, XYZ Manufacturing Company Limited. In order to ascertain the relationship that exists between the company’s annual expenditure and annual income, the following information was extracted from the company’s record for eight different years:
| Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
|---|---|---|---|---|---|---|---|---|
| Expenditure (x) | 30 | 25 | 40 | 35 | 50 | 30 | 55 | 20 |
| Income (y) | 42 | 45 | 55 | 50 | 60 | 40 | 70 | 35 |
You are required to:
i. Calculate the Pearson’s product-moment correlation coefficient between xx and yy. (9 Marks)
ii. Comment on the result in (i). (1 Mark)
(Total: 10 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Data Relationship, Expenditure, Financial Analysis, Income, Pearson Correlation
- Level: Level 1
- Topic: Statistics
- Series: NOV 2015