In a recent survey concerning company sales and net earnings, 15 companies responded. Data analysis was computed, letting sales ($ thousands) be the independent variable, and net earnings ($ thousands) be the dependent variable.
The results are as follows:
Regression analysis:
Observations n = 15
Intercept -0.07
Sales of coefficient 0.07
Coefficient of correlation r= 0.537
Value of t-statistics t= 2.382
Using this information, answer the following questions.
a) Use the regression line above to estimate the net earnings for a company with sales of $62.4 thousand. For full marks, estimate your answer to the nearest dollar.
Earnings: $ 0
b) Given the regression equation provided above, which of the following statements is most appropriate regarding company sales and earnings?
- Positive sales means positive net earnings for any business.
- Sales have no effect on net revenues.
- Insufficient sales can lead to net losses for some businesses.
- After a certain level of sales has been reached, net earnings stop growing entirely.