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

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

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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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