Group 8 Masatoshi Hirokawa, Han Liu, Christian Mundo, Ashley Arlotti, Jingyu Nie, and Aygul Nagaeva.

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Presentation transcript:

Group 8 Masatoshi Hirokawa, Han Liu, Christian Mundo, Ashley Arlotti, Jingyu Nie, and Aygul Nagaeva

What?  The Forbes 500 includes the top companies of each major industry  Data includes sales, profits, market- value, assets, cash-flow, and employees of each company  Industries included are energy, finance, transportation, hi-tech, manufacturing, communication, medical, and retail

Why?  Understanding the correlation of variables in an industry gives insight to: Health Growth Value

How?  To understand the correlation we used Ordinary Least Squares to create regression equations  If values were questionable further analysis is done through White’s test (Testing for heteroskedasticity)

Variables Used  Facts about companies selected from the Forbes 500 list for This is a 1/10 systematic sample from the alphabetical list of companies. (Data found at:  Sales: Amount of sales (in millions)  Assets: Amount of assets (in millions)  Market_Value: Market Value of the company (in millions)  Profits: Profits (in millions)  Cash_Flow: Cash Flow (in millions)  Employees: Number of employees (in thousands)  Sector: Type of market the company is associated with

Total Sales by Sector

Sector Proportions

Regression Before Grouping Dummies: 1.Other 2.Energy 3.Finance 4.Transportation 5.Hi-Tech 6.Manufacturing 7.Communication 8.Medical 9.Retail

Dropping Variables  All remaining variables are significant  Only dum3 is left, representing the financial sector

Adding Profits Until this point we have left profits out of the regression because of its relationship with sales

Regression of Profits vs Sales This is the regression performed with profits as the dependent variable and Sales as the independent variable

Profits vs Sales

White’s Test Since the Profits vs Sales regression had a negative correlation coefficient we did extra analysis with the White’s Test to find heteroskedasticity in the residuals

Regression Before Grouping Dummies: 1.Other 2.Energy 3.Finance 4.Transportation 5.Hi-Tech 6.Manufacturing 7.Communication 8.Medical 9.Retail

Wald’s Test In order to group all of the Dummy variables we used a Wald’s Test from the equation: SALES = C(1)*MARKET + C(2)*EMPLOYEE + C(3)*CASHFLOW + C(4)*ASSETS + C(5)*ENERGYD2 + C(6)*FINANCED3 + C(7)*TRANSPORTATIOND4 + C(8)*HITECHD5 + C(9)*MANUFACTURINGD6 + C(10)*COMMUCATIOND7 + C(11)*MEDICALD8 + C(12)*RETAILD9

Regression After Grouping Dummy Negative includes finance (dum3), hi-tech (dum5), Communication (dum7), and Medical (dum8) Dummy Positive includes energy (dum2), transportation (dum4), manufacturing (dum6), and retail (dum9)

Final Equation  SALES = (EMPLOYEE) (ASSETS) (CASHFLOW) (DUMNEG ) (DUMPOS) Every 1000 employees generates about 61 million dollars in sales Every dollar in assets gives.22 in sales Every dollar of cash flow correlates to 1.4 in sales Depending on the sector, there is a negative or positive effect on sales

Conclusion  The only insignificant variable in determining the number of sales for a company or industry is market-value  Profits is negatively correlated with number of sales which could be because of its heteroskedastic error or increase in production cost  Grouping dummy variables for sector together helped to make a more significant regression.