In management, many numeric measures are related (either strongly or loosely) to one another. Lewis, a business analyst, believes…

Question:

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In management, many numeric measures are related (either

strongly or loosely) to one another. Lewis, a business analyst,

believes that capital utilisation (as measured by inventory turnover)

has a direct effect on a company’s earnings yield. To examine this

belief, Lewis randomly surveyed nine JSE-listed companies and

recorded their inventory turnover and their earning yield.

Inventory Turnover

Earnings Yield

3

10

5

12

4

8

7

13

6

15

4

10

8

16

6

13

5

10

Compute and interpret the strength of the association between

inventory turnover and earnings yield using:

a. Pearson’s correlation coefficient. (15)

Expert Answer:

Answer rating: 100% (QA)

To compute Pearson s correlation coefficient between inventory turnover and earnings yield we need to calculate the covariance and variances of the tw

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