Phoenix

Stephan Tucker Levels of Measurement, Simultaneous Equations, and Time Series 9-28-09 Ch. 1, exercise 18 Refer to the Wage data, which reports information on annual wages for a sample of 100 workers. Also included are variables relating to industry, years of education, and gender for each worker. Which of the 12 variables are qualitative= QL and which are quantitative=QT' x1 = Annual wage in dollars QT x2 = Industry (1 = Manufacturing, 2 = Construction, 0 = Other) QL x3 = Occupation (1 = Mgmt., 2 = Sales, 3 = Clerical, 4 = Service, 5 = Prof., 0 = Other) QL x4 = Years of education QT x5 = Southern resident (1 = Yes, 0 = No) QL x6 = Non-white (1 = Yes, 0 = No) QL x7 = Hispanic (1 = Yes, 0 = No) QL x8 = Female (1 = Yes, 0 = No) QL x9 = Years of Work Experience QT x10 = Married (1 = Yes, 0 = No) QL x11 = Age in years QT x12 = Union member (1 = Yes, 0 = No) QL b. Determine the level of measurement for each variable. x1 = Annual wage in dollars Ratio x2 = Industry (1 = Manufacturing, 2 = Construction, 0 = Other) Nominal x3 = Occupation (1 = Mgmt., 2 = Sales, 3 = Clerical, 4 = Service, 5 = Prof., 0 = Other) Nominal x4 = Years of education Ratio x5 = Southern resident (1 = Yes, 0 = No) Nominal x6 = Non-white (1 = Yes, 0 = No) Nominal x7 = Hispanic (1 = Yes, 0 = No) Nominal x8 = Female (1 = Yes, 0 = No) Nominal x9 = Years of Work Experience Ratio x10 = Married (1 = Yes, 0 = No) Nominal x11 = Age in years Ratio x12 = Union member (1 = Yes, 0 = No) Nominal Ch. 3, problem 3-41High-Low Method Manchester Foundry produced 45,000 tons of steel in March at a cost of £1,150,000. 35,000 tons in April at a cost of £950,000. Using only these two data points, determine the cost function for Manchester. Change in cost / change in activity Cost activity 1150000 45000 950000 35000 1150000 – 950000= 200000 45000-35000= 10000 200000/10000=20 Fixed cost per month = total mixed cost – total variable cost F = 1150000 – 20(45000) F =1150000-900000 F =250000 F = 950000 – 20(35000) F = 950000- 700000 F =250000 +20 Ch. 3, case C3.18 Part F - H 1995 1996 1997 1998 1999 Net sales $3,676,328 $5,035,228 $6,293,680 $7,467,925 $8,645,561 Net income 172,981 250,679 109,797 346,399 427,944 Total assets 1,124,011 1,673,411 2,039,271 2,890,380 3,954,688 Long-term obligations, net of current maturities 10,805 7,244 7,240 3,360 2,998 f. Are the trends expressed in the above data generally consistent with each other' 1995 % 1996 1997 1998 1999 Net sales $3,676,328 100 $5,035,228 100 $6,293,680 100 $7,467,925 100 $8,645,561 100 Net income 172,981 .46 250,679 .5 109,797 1.74 346,399 4.64 427,944 4.95 Total assets 1,124,011 2.98 1,673,411 3.32 2,039,271 32.4 2,890,380 38.7 3,954,688 45.74 Long-term obligations, net of current maturities 10,805 0.03 7,244 0.01 7,240 0.12 3,360 0.04 2,998 0.03 ROI 0.15 0.15 0.05 0.12 0.11 The various numbers were compared with net sales and showed them as a percentage of sales. Although the ratio of total assets as compared to sales are greater in years 1997-1999, the ROI is less then years 1995-1996. Total income in 1997 -1999 is again greater than 1995-1996. g. In your opinion, which of the above trends would be most meaningful to a potential investor in common stock of Gateway, Inc.' Which trend would be least meaningful' • All investors want to know exactly what they are going to get back from what they have put in. Return of investment is the key to an investor. The significant trends that make up ROI are Net Income, Net Sales, and Total Assets (Marshall, McManus, & Viele, 2003). • A good investor would gather as much information as possible. The DuPont model does not use obligation for investment. h. What other data (trend or otherwise) would you like to have access to prior to making an investment in Gateway, Inc.' • The rate of return as this is a universally accepted method for measuring profitability (Marshall, McManus, & Viele, 2003). Rate of return = amount of return / amount invested • The return on investment is another accepted way to measure profitability as it relates the income earned during a time frame to the assets that were invested within that time frame to create the profit (Marshall, McManus, & Viele, 2003). Return on investment = net income / average total assets • Liquidity as the investor wants to know that the organization can meet its current obligations which mean the organization has to show that it has good working capital. This capital does not just have to be monetary but can be other assets that can be converted to cash throughout the year (Marshall, McManus, & Viele, 2003). Working capital= Current assets – Current liabilities Bibliography References Marshall, McManus, & Viele, (2003). Accounting: What the Numbers Mean, Sixth Edition; 70-74.