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Apr 21, 2014

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Financial working capital

© All Rights Reserved

5 tayangan

Financial working capital

© All Rights Reserved

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Current ratio: Current ratio is defined as the total liquidity of the firm. The ideal current ratio is 2 :1 which means that ideally the current assets should be more , should be twice than that of current liabilities as the ratio states that current ratio = current assets /current liabilities higher the liquidity of the firm lower is the risk ,lower is the profit.

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.473085236 0.223809641 0.029762051 1.633745573 6

MS 3.078501605 2.669124599

F 1.153375008

t Stat 0.558125347

P-value 0.60652112

2.67436145

1.073952982

0.343312664

-4.553079

10.2973562

-4.553079306

10.297356

Interpretations of the regressed output : R square is roughly 22.2% which shows that the regressed model is not relevant because that means that 22.2% of the variation in ROCE IS explained by current ratio Standard error basically shows that how much is the data dispersed which is around 1.63.

The x variable is in positive which clearly states that there is a direct relationship between current ratio and ROCE because an increase in the value of the current ratio will lead to a increase in the value of ROCE as the equation here is Y=1.75 + 2.87X X here stand for current ratio The p value is around 0.34 which shows that the value of the slope is significant. Correlation is coming out to be 0.47 which shows the direct relationship between the ROCE and the current ratio and further confirms the positive slope.

Raw material inventory holding period : Raw material inventory holding period is the time taken to convert the raw materials into work in progress; it is not advisable for the firm to show a higher raw material inventory holding period as it increases the time for the complete manufacture Our analysis shows :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.8333264 0.6944329 0.6180412 1.0250701 6

MS 9.55192508 1.05076873

F 9.0904162

t Stat 7.045546068

P-value 0.0021395

RIHP

-0.030227

0.010025319

-3.01503171

0.039355

-0.0580614

-0.0580614

As per the theory we know that greater is the raw material holding period , lesser is the profit or the ROCE The regressed output also derives the same relationship between the two variables: R square is approximately 70 percent which clearly states that the regressed model is a very good model because it clearly states that 70 percent of the changes in ROCE can be explained by the raw material inventory holding period. Standard error shows that how much is the data scattered which is around 1.025 The x variable is in negative which clearly states that there is an inverse relationship between raw material inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=8.42 0.03 X X here stand for raw material inventory holding period The p value is around 0.039 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.83 which shows the inverse relationship between the ROCE and the raw material inventory holding period FINISHED GOODS HOLDING PERIOD Finished goods holding period is the period for which the finished goods are kept and not sold .the firm always tries to minimise the finished goods holding period

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.28699 0.0823633

-0.1470459

1.7763793 6

df Regression 1

SS 1.132907

MS 1.132907

F 0.3590235

Residual Total

4 5

12.622093 13.755

3.1555233

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Upper 95.0%

Intercept

7.5217108

4.1883776

1.7958531 0.5991857

0.1469459

-4.1070897

19.150511

19.150511

FIHP

-0.0711625

0.1187654

0.5813337

-0.400908

0.258583

-0.400908

0.258583

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 8% which clearly states that the regressed model is a not very good model because it clearly states that 92% of the changes in ROCE cannot be explained by the finished goods inventory holding period. Standard error shows that how much is the data scattered which is around 1.77 which is essential in plotting the graph because the variation is very less. The x variable is in negative which clearly states that there is an inverse relationship between finished inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=7.520.07X X here stand for coefficient of finished goods inventory holding period The p value is around 0.58 which shows that the value of the slope is not very significant. The lesser the p value the more significant is the slope but here p-value is more than 0.5 which shows irrelevancy. Correlation is coming out to be negative 0.28 which shows the inverse relationship between the ROCE and finished goods inventory holding period Average collection period : As per the theory we know that a firma always tries to minimise its average collection period because the lesser is the average collection period , more quickly is the cash generated in the business . Our analysis shows that :

Regression Statistics Multiple R 0.1647277

0.0271352

-0.216081 1.8290541 6

MS 0.3732448 3.3454388

F 0.1115683

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 2.7 percent which clearly states that the regressed model is a not good model because it clearly states that 97.3 percent of the changes in ROCE cannot be explained by the average collection period. Standard error shows that how much is the data scattered which is around 1.82 which means that around 1.82 percent of the data is scattered. The x variable is in negative which clearly states that there is an inverse relationship between average collection period and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=6.177 0.027X X here stand for coefficient of average collection period The p value is around 0.755 which shows that the value of the slope is not significant. The lesser the p value the more significant is the slope. Correlation is coming out to be negative 0.164 which shows the inverse relationship between the ROCE and finished goods inventory holding period

Average payment period : The average payment period refers to the time which is taken by a company in order to pay off its creditors in a working capital cycle, the average payment period should always be prolonged , however, care should be taken that it does not effect the business at large . Our analysis:

Regression Statistics Multiple R R Square Adjusted Square R 0.7176738 0.8812941 6 0.8798517 0.774139

MS 10.648283 0.7766794

F 13.710011

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 77 percent which clearly states that the regressed model is a good model which clearly states that 77 percent of the changes in ROCE can be explained by the average payment period Standard error shows that how much is the data scattered which is around 6.41which means that around 6.41 percent of the data is scattered. The x variable is in negative which clearly states that there is an indirect relationship between average payment period and ROCE because an increase in the value of the average payment period will lead to an decrease in the value of ROCE as the equation here is

Y=14.3 0.086X X here stand for coefficient of average payment period The p value is around 0.02 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.879 which shows the indirect relationship between the ROCE and APP.

The net working capital refers to CURRENT ASSETS CURRENT LIABILITIES , these are the short term assets and the short term liabilities of the company , higher the liquidity in the company lower is the profit or ROCE Our analysis shows that :

Multiple R

df

SS

MS 9.701994 08 1.013251 48

F 9.575109 7

Regression

9.701994079

Residual Total

4 5

4.053005921 13.755

Standard Error

t Stat 9.412576 57

Lower 95.0%

0.738064195

4.897891

3.04471E-05

-3.094367

-0.00017874

-0.000179

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 70.5 percent which clearly states that the regressed model is a good model because it clearly states that 70.5 percent of the changes in ROCE can be explained by the change in Net Working Capital Standard error shows that how much is the data scattered which is around 1 which means that around 1 percent of the data is scattered. The x variable is in negative which clearly states that there is an inverse relationship between Net Working Capital and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE but the slope is approximately ~0, which means that the impact is not very large as the equation here is Y=6.94 (9.4 x 10-5X) X here stand for coefficient of Net Working Capital The p value is around 0.03 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.839 which shows the inverse relationship between the ROCE and Net Working Capital

Current ratio: Current ratio is defined as the total liquidity of the firm. The ideal current ratio is 2 :1 which means that ideally the current assets should be more , should be twice than that of current liabilities as the ratio states that current ratio = current assets /current liabilities higher the liquidity of the firm lower is the risk ,lower is the profit.

Regression Statistics Multiple R R Square Adjusted Square R -0.1983819 4.4546163 6 0.2032105 0.0412945

MS 3.4189085 19.843606

F 0.1722927

t Stat 0.3137006

P-value 0.7694267

-7.3477509

17.701945

-0.4150816

0.69938

-56.496229

41.800728

-56.496229

41.800728

Interpretations of the regressed output : R square is roughly 9 percent which shows that the regressed model is not relevant because that means that 9 percent of the variation in ROCE IS explained by current ratio Standard error basically shows that how much is the data dispersed which is around 6.225 The x variable is in negative which clearly states that there is an inverse relationship between current ratio and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is

Y=44.21845--17.95660X X here stand for current ratio The p value is around 0.5 which shows that the value of the slope is significant. Correlation is coming out to be negative between the ROCE and the current ratio 0.03 which shows the inverse relationship

This can also be studied by the scattered diagram above here we study the trend line between ROCE and current ratio the trend line is moving downwards which clearly states that with the increase in the current ratio the ROCE decreases.

Raw material inventory holding period is the time taken to convert the raw materials into work in progress; it is not advisable for the firm to show a higher raw material inventory holding period as it increases the time for the complete manufacture Our analysis shows :

Regression Statistics Multiple R R Square Adjusted Square R 0.8757719 1.4342428 6 0.9490087 0.9006175

MS 74.565124 2.0570524

F 36.248528

As per the theory we know that greater is the raw material holding period , lesser is the profit or the ROCE The regressed output also derives the same relationship between the two variables: R square is roughly 75 percent which clearly states that the regressed model is a very good model because it clearly states that 75 percent of the changes in ROCE can be explained by the raw material inventory holding period. Standard error shows that how much is the data scattered which is around 4.306 The x variable is in negative which clearly states that there is an inverse relationship between raw material inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=55.1200.519X X here stand for raw material inventory holding period The p value is around 0.085 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.75 which shows the inverse relationship between the ROCE and the raw material inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and raw material inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the raw material inventory holding period the ROCE decreases. FINISHED GOODS HOLDING PERIOD Finished goods holding period is the period for which the finished goods are kept and not sold .the firm always tries to minimise the finished goods holding period

Regression Statistics Multiple R R Square Adjusted Square R -0.2497996 4.5491774 6 0.0126609 0.0001603

ANOVA

MS 0.0132716 20.695015

F 0.0006413

Significance F 0.9810097

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 85 percent which clearly states that the regressed model is a very good model because it clearly states that 85 percent of the changes in ROCE can be explained by the finished goods inventory holding period. Standard error shows that how much is the data scattered which is around 2.517 which is essential in plotting the graph because the variation is very less. The x variable is in negative which clearly states that there is an inverse relationship between finished inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=72.462671.60424X X here stand for coefficient of finished goods inventory holding period The p value is around 0.008 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.992 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and finished goods inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the finished goods inventory holding period the ROCE decreases. Average collection period :

As per the theory we know that a firm always tries to minimise its average collection period because the lesser is the average collection period , more quickly is the cash generated in the business . Our analysis shows that :

Regression Statistics Multiple R R Square Adjusted Square R -0.2320304 4.5167223 6 0.1198987 0.0143757

MS 1.1902113 20.400781

F 0.0583415

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the average collection period Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered. The x variable is in negative which clearly states that there is an inverse relationship between average collection period and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X

X here stand for coefficient of average collection period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE COLLECTION PERIOD, the trend line is moving downwards which clearly states that with the increase in the average collection period the ROCE decreases.

Average payment period : The average payment period refers to the time which is taken by a company in order to pay off its creditors in a working capital cycle, the average payment period should always be prolonged , however, care should be taken that it does not effect the business at large . Our analysis:

Regression Statistics Multiple R R Square Adjusted Square R 0.4488355 3.0210178 6 0.7477088 0.5590684

MS 46.287139 9.1265485

F 5.0717025

R square is 3 percent which clearly states that the regressed model is a model be which clearly states that 3 percent of the changes in ROCE can be explained by the average payment period Standard error shows that how much is the data scattered which is around 6.41which means that around 6.5 percent of the data is scattered.

The x variable is in positive which clearly states that there is an direct relationship between average payment period and ROCE because an increase in the value of the average payment period will lead to an increase in the value of ROCE as the equation here is Y=13.56+0.283X X here stand for coefficient of average payment period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be positive 0.188 which shows the direct relationship between the ROCE and APP This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE PAYMENT PERIOD, the trend line is moving UPWARDS which clearly states that with the increase in the average payment period the ROCE increases

The net working capital refers to CURRENT ASSETS CURRENT LIABILITIES , these are the short term assets and the short term liabilities of the company , higher the liquidity in the company lower is the profit or ROCE Our analysis shows that :

Adjusted Square

R 0.6134697 2.5299064 6

MS 57.191628 6.4004264

F 8.9355965

t Stat -2.1874884

P-value 0.0939552

0.0002459

8.225E-05

2.9892468

0.0403681

1.75E-05

0.0004742

1.75E-05

0.0004742

R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the change in Net Working Capital Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered.

The x variable is in negative which clearly states that there is an inverse relationship between Net Working Capital and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X X here stand for coefficient of Net Working Capital The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and Net Working Capital This can also be studied by the scattered diagram above here we study the trend line between ROCE and Net Working Capital,

the trend line is moving downwards which clearly states that with the increase in the Net

Current ratio:

Current ratio is defined as the total liquidity of the firm. The ideal current ratio is 2 :1 which means that ideally the current assets should be more , should be twice than that of current liabilities as the ratio states that current ratio = current assets /current liabilities higher the liquidity of the firm lower is the risk ,lower is the profit.

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.0285401 0.0008145 -0.2489818

4.539488 6

ANOVA df Regression Residual Total 1 4 5 SS 0.0671951 82.427805 82.495 MS 0.0671951 20.606951 F 0.0032608 Significance F 0.9572015

Coefficients

t Stat

P-value

Lower 95%

Intercept

7.8496847

1.0841347

0.3392809

-12.253184

-0.7065729

12.373572

0.0571034

0.9572015

-35.061117

33.647971

33.647971

R square is roughly 9 percent which shows that the regressed model is not relevant because that means that 9 percent of the variation in ROCE IS explained by current ratio Standard error basically shows that how much is the data dispersed which is around 6.225 The x variable is in negative which clearly states that there is an inverse relationship between current ratio and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=44.21845--17.95660X X here stand for current ratio The p value is around 0.5 which shows that the value of the slope is significant. Correlation is coming out to be negative between the ROCE and the current ratio 0.03 which shows the inverse relationship

This can also be studied by the scattered diagram above here we study the trend line between ROCE and current ratio the trend line is moving downwards which clearly states that with the increase in the current ratio the ROCE decreases.

Raw material inventory holding period is the time taken to convert the raw materials into work in progress; it is not advisable for the firm to show a higher raw material inventory holding period as it increases the time for the complete manufacture Our analysis shows :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.8022975 0.6436812 0.5546016

2.7108355 6

Residual Total

4 5

29.394516 82.495

7.348629

Coefficients

t Stat

P-value

Lower 95%

Intercept

-39.890443

-2.260616

0.0866214

-88.883118

RIHP

1.0328824

0.384242

2.6881041

0.0547657

-0.0339443

2.0997091

2.0997091

As per the theory we know that greater is the raw material holding period , lesser is the profit or the ROCE The regressed output also derives the same relationship between the two variables: R square is roughly 75 percent which clearly states that the regressed model is a very good model because it clearly states that 75 percent of the changes in ROCE can be explained by the raw material inventory holding period. Standard error shows that how much is the data scattered which is around 4.306 The x variable is in negative which clearly states that there is an inverse relationship between raw material inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=55.1200.519X X here stand for raw material inventory holding period The p value is around 0.085 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.75 which shows the inverse relationship between the ROCE and the raw material inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and raw material inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the raw material inventory holding period the ROCE decreases. FINISHED GOODS HOLDING PERIOD Finished goods holding period is the period for which the finished goods are kept and not sold .the firm always tries to minimise the finished goods holding period

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.1335984 0.0178485 -0.2276893

4.5006274 6

ANOVA df Regression Residual Total 1 4 5 SS 1.4724137 81.022586 82.495 MS 1.4724137 20.255647 F 0.0726915 Significance F 0.8007947

Coefficients

t Stat

P-value

Lower 95%

Intercept

8.8955898

1.5694984 0.2696136

0.1916157

-6.8407221

FIHP

-0.0869964

0.3226705

0.8007947

-0.9828734

0.8088806

0.8088806

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 85 percent which clearly states that the regressed model is a very good model because it clearly states that 85 percent of the changes in ROCE can be explained by the finished goods inventory holding period. Standard error shows that how much is the data scattered which is around 2.517 which is essential in plotting the graph because the variation is very less. The x variable is in negative which clearly states that there is an inverse relationship between finished inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=72.462671.60424X X here stand for coefficient of finished goods inventory holding period

The p value is around 0.008 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.992 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and finished goods inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the finished goods inventory holding period the ROCE decreases. Average collection period : As per the theory we know that a firm always tries to minimise its average collection period because the lesser is the average collection period , more quickly is the cash generated in the business . Our analysis shows that :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.4451523 0.1981606 -0.0022993

4.0665631 6

ANOVA df Regression Residual Total 1 4 5 SS 16.347258 66.147742 82.495 MS 16.347258 16.536935 F 0.9885301 Significance F 0.3763773

Coefficients

t Stat

P-value

Lower 95%

Intercept

16.78565

1.7603711 0.9942485

0.1531505

-9.6885604

ACP

-0.8461314

0.8510261

0.3763773

-3.2089585

1.5166957

1.5166957

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the average collection period Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered. The x variable is in negative which clearly states that there is an inverse relationship between average collection period and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X X here stand for coefficient of average collection period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE COLLECTION PERIOD, the trend line is moving downwards which clearly states that with the increase in the average collection period the ROCE decreases.

Average payment period : The average payment period refers to the time which is taken by a company in order to pay off its creditors in a working capital cycle, the average payment period should always be prolonged , however, care should be taken that it does not effect the business at large . Our analysis:

0.1978432 -0.0026959

4.0673678 6

ANOVA df Regression Residual Total 1 4 5 SS 16.321078 66.173922 82.495 MS 16.321078 16.54348 F 0.9865565 Significance F 0.3768063

Coefficients

t Stat

P-value

Lower 95%

Intercept

18.93834

1.6207486 0.9932555

0.1803879

-13.504238

APP

-0.0795316

0.0800716

0.3768063

-0.3018461

0.1427829

0.1427829

R square is 3 percent which clearly states that the regressed model is a model be which clearly states that 3 percent of the changes in ROCE can be explained by the average payment period Standard error shows that how much is the data scattered which is around 6.41which means that around 6.5 percent of the data is scattered.

The x variable is in positive which clearly states that there is an direct relationship between average payment period and ROCE because an increase in the value of the average payment period will lead to an increase in the value of ROCE as the equation here is Y=13.56+0.283X X here stand for coefficient of average payment period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be positive 0.188 which shows the direct relationship between the ROCE and APP

This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE PAYMENT PERIOD, the trend line is moving UPWARDS which clearly states that with the increase in the average payment period the ROCE increases

The net working capital refers to CURRENT ASSETS CURRENT LIABILITIES , these are the short term assets and the short term liabilities of the company , higher the liquidity in the company lower is the profit or ROCE Our analysis shows that :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.6129668 0.3757283 0.2196604

3.5881504 6

ANOVA df Regression Residual Total 1 4 5 SS 30.995707 51.499293 82.495 MS 30.995707 12.874823 F 2.4074666 Significance F 0.1957043

t Stat 3.3418283

P-value 0.0287868

0.0001557

0.0001004

1.5516013

0.1957043

-0.0001229

0.0004344

0.0004344

R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the change in Net Working Capital Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered.

The x variable is in negative which clearly states that there is an inverse relationship between Net Working Capital and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X X here stand for coefficient of Net Working Capital The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and Net Working Capital This can also be studied by the scattered diagram above here we study the trend line between ROCE and Net Working Capital, the trend line is moving downwards which clearly states that with the increase in the Net

Current ratio:

Current ratio is defined as the total liquidity of the firm. The ideal current ratio is 2 :1 which means that ideally the current assets should be more , should be twice than that of current liabilities as the ratio states that current ratio = current assets /current liabilities higher the liquidity of the firm lower is the risk ,lower is the profit.

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.7982821 0.6372543

0.5465679

7.0185652 6

MS 346.1523 49.260258

F 7.0270096

Coefficients

Standard Error

t Stat 2.0839635

P-value

Lower 95%

Upper 95%

Upper 95.0%

-54.709995

26.252856

0.1055486

-127.59961

18.179619

18.179619

42.697251

16.106999

2.6508507

0.0569312

-2.0229484

87.41745

87.41745

R square is roughly 9 percent which shows that the regressed model is not relevant because that means that 9 percent of the variation in ROCE IS explained by current ratio Standard error basically shows that how much is the data dispersed which is around 6.225 The x variable is in negative which clearly states that there is an inverse relationship between current ratio and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=44.21845--17.95660X X here stand for current ratio The p value is around 0.5 which shows that the value of the slope is significant. Correlation is coming out to be negative between the ROCE and the current ratio 0.03 which shows the inverse relationship

This can also be studied by the scattered diagram above here we study the trend line between ROCE and current ratio the trend line is moving downwards which clearly states that with the increase in the current ratio the ROCE decreases.

Raw material inventory holding period is the time taken to convert the raw materials into work in progress; it is not advisable for the firm to show a higher raw material inventory holding period as it increases the time for the complete manufacture Our analysis shows :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.4123749 0.1700531

-0.0374336

10.61628 6

df Regression Residual 1 4

SS 92.371709 450.82162

MS 92.371709 112.70541

F 0.8195854

Total

543.19333

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Upper 95.0%

Intercept

48.511375

37.854528

1.2815211 0.9053096

0.2692551

-56.589643

153.61239

153.61239

RIHP

-0.4124965

0.4556413

0.4165004

-1.6775596

0.8525667

0.8525667

As per the theory we know that greater is the raw material holding period , lesser is the profit or the ROCE The regressed output also derives the same relationship between the two variables: R square is roughly 75 percent which clearly states that the regressed model is a very good model because it clearly states that 75 percent of the changes in ROCE can be explained by the raw material inventory holding period. Standard error shows that how much is the data scattered which is around 4.306 The x variable is in negative which clearly states that there is an inverse relationship between raw material inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=55.1200.519X X here stand for raw material inventory holding period The p value is around 0.085 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.75 which shows the inverse relationship between the ROCE and the raw material inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and raw material inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the raw material inventory holding period the ROCE decreases. FINISHED GOODS HOLDING PERIOD Finished goods holding period is the period for which the finished goods are kept and not sold .the firm always tries to minimise the finished goods holding period

Regression Statistics

0.5410124 0.2926944

0.115868

9.8005572 6

MS 158.98965 96.050922

F 1.6552641

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Upper 95.0%

Intercept

61.106059

36.471069

1.6754666 1.2865707

0.1691523

-40.153862

162.36598

162.36598

FIHP

-0.7698387

0.5983648

0.2676571

-2.4311658

0.8914885

0.8914885

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 85 percent which clearly states that the regressed model is a very good model because it clearly states that 85 percent of the changes in ROCE can be explained by the finished goods inventory holding period. Standard error shows that how much is the data scattered which is around 2.517 which is essential in plotting the graph because the variation is very less. The x variable is in negative which clearly states that there is an inverse relationship between finished inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=72.462671.60424X X here stand for coefficient of finished goods inventory holding period The p value is around 0.008 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope

Correlation is coming out to be negative 0.992 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and finished goods inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the finished goods inventory holding period the ROCE decreases. Average collection period : As per the theory we know that a firm always tries to minimise its average collection period because the lesser is the average collection period , more quickly is the cash generated in the business . Our analysis shows that :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.9461511 0.8952018

0.8690023

3.7724552 6

MS 486.26766 14.231418

F 34.168602

P-value 0.0021195

ACP

-2.1651028

0.3703948

0.0042715

-3.1934838

R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the average collection period Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered. The x variable is in negative which clearly states that there is an inverse relationship between average collection period and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X X here stand for coefficient of average collection period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE COLLECTION PERIOD, the trend line is moving downwards which clearly states that with the increase in the average collection period the ROCE decreases.

0.5536239 6.9637419

Standard

Error Observations 6

MS 349.21853 48.493702

F 7.2013171

t Stat 3.6162692

P-value 0.0224313

APP

-0.4832939

0.1800965

-2.683527

0.0550266

-0.9833221

0.0167342

0.0167342

R square is 3 percent which clearly states that the regressed model is a model be which clearly states that 3 percent of the changes in ROCE can be explained by the average payment period Standard error shows that how much is the data scattered which is around 6.41which means that around 6.5 percent of the data is scattered.

The x variable is in positive which clearly states that there is an direct relationship between average payment period and ROCE because an increase in the value of the average payment period will lead to an increase in the value of ROCE as the equation here is Y=13.56+0.283X X here stand for coefficient of average payment period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be positive 0.188 which shows the direct relationship between the ROCE and APP This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE PAYMENT PERIOD, the trend line is moving UPWARDS which clearly states that with the increase in the average payment period the ROCE increases

The net working capital refers to CURRENT ASSETS CURRENT LIABILITIES , these are the short term assets and the short term liabilities of the company , higher the liquidity in the company lower is the profit or ROCE Our analysis shows that :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.5393867 0.290938

0.1136725

9.8127181 6

MS 158.03559 96.289436

F 1.6412557

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Upper 95.0%

36.56418

17.70775

2.0648688

0.1078555

-12.600415

85.728776

85.728776

-0.0001914

0.0001494

-1.281115

0.269384

-0.0006061

0.0002233

0.0006061

0.0002233

R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the change in Net Working Capital Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered.

The x variable is in negative which clearly states that there is an inverse relationship between Net Working Capital and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X X here stand for coefficient of Net Working Capital The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and Net Working Capital This can also be studied by the scattered diagram above here we study the trend line between ROCE and Net Working Capital, the trend line is moving downwards which clearly states that with the increase in the Net

Current ratio:

Current ratio is defined as the total liquidity of the firm. The ideal current ratio is 2 :1 which means that ideally the current assets should be more , should be twice than that of current liabilities as the ratio states that current ratio = current assets /current liabilities higher the liquidity of the firm lower is the risk ,lower is the profit.

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.5546638 0.307652

0.134565

2.3168956 6

MS 9.5413133 5.368005

F 1.7774412

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Upper 95.0%

18.622102

6.9320608

2.6863731 1.3332071

0.0548642

-0.6243844

37.868588

37.868588

-14.672172

11.005171

0.253326

-45.227424

15.88308

15.88308

R square is roughly 9 percent which shows that the regressed model is not relevant because that means that 9 percent of the variation in ROCE IS explained by current ratio Standard error basically shows that how much is the data dispersed which is around 6.225 The x variable is in negative which clearly states that there is an inverse relationship between current ratio and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=44.21845--17.95660X X here stand for current ratio The p value is around 0.5 which shows that the value of the slope is significant. Correlation is coming out to be negative between the ROCE and the current ratio 0.03 which shows the inverse relationship

Raw material inventory holding period is the time taken to convert the raw materials into work in progress; it is not advisable for the firm to show a higher raw material inventory holding period as it increases the time for the complete manufacture Our analysis shows :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.2090685 0.0437096

-0.195363

2.7229466 6

df Regression Residual 1 4

SS 1.3555816 29.657752

MS 1.3555816 7.4144379

F 0.18283

Total

31.013333

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Upper 95.0%

Intercept

1.7010758

18.19545

0.0934891

0.9300106

-48.817593

52.219745

52.219745

RIHP

0.0783875

0.1833257

0.4275862

0.6909664

-0.4306061

0.5873811

0.5873811

As per the theory we know that greater is the raw material holding period , lesser is the profit or the ROCE The regressed output also derives the same relationship between the two variables: R square is roughly 75 percent which clearly states that the regressed model is a very good model because it clearly states that 75 percent of the changes in ROCE can be explained by the raw material inventory holding period. Standard error shows that how much is the data scattered which is around 4.306 The x variable is in negative which clearly states that there is an inverse relationship between raw material inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=55.1200.519X X here stand for raw material inventory holding period The p value is around 0.085 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.75 which shows the inverse relationship between the ROCE and the raw material inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and raw material inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the raw material inventory holding period the ROCE decreases. FINISHED GOODS HOLDING PERIOD Finished goods holding period is the period for which the finished goods are kept and not sold .the firm always tries to minimise the finished goods holding period

Regression Statistics

0.8726141 0.7614554

0.7018192

1.3599691 6

MS 23.615269 1.849516

F 12.768351

Coefficients

Standard Error

P-value

Lower 95%

Upper 95%

Upper 95.0%

Intercept FIHP

-7.5259621 0.4983176

4.7877676 0.1394565

0.1910704 0.0233072

-20.818936 0.1111242

5.7670119 0.8855109

5.7670119 0.8855109

INTERPRETATIONS OF THE REGRESSED OUTPUT: R square is 85 percent which clearly states that the regressed model is a very good model because it clearly states that 85 percent of the changes in ROCE can be explained by the finished goods inventory holding period. Standard error shows that how much is the data scattered which is around 2.517 which is essential in plotting the graph because the variation is very less. The x variable is in negative which clearly states that there is an inverse relationship between finished inventory holding period and ROCE because an increase in the value of the current ratio will lead to a decline in the value of ROCE as the equation here is Y=72.462671.60424X X here stand for coefficient of finished goods inventory holding period The p value is around 0.008 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope

Correlation is coming out to be negative 0.992 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and finished goods inventory holding period, the trend line is moving downwards which clearly states that with the increase in the the finished goods inventory holding period the ROCE decreases. Average collection period : As per the theory we know that a firm always tries to minimise its average collection period because the lesser is the average collection period , more quickly is the cash generated in the business . Our analysis shows that :

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.587305 0.3449271

0.1811589

2.2536633 6

MS 10.69734 5.0789985

F 2.1061907

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Upper 95.0%

Intercept

3.2759552

4.3638073

0.7507103

0.4945761

-8.8399161

15.391827

15.391827

ACP

0.7869548

0.5422518

1.4512721

0.2203313

-0.7185774

2.2924871

2.2924871

R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the average collection period Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered. The x variable is in negative which clearly states that there is an inverse relationship between average collection period and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X X here stand for coefficient of average collection period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and finished goods inventory holding period This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE COLLECTION PERIOD, the trend line is moving downwards which clearly states that with the increase in the average collection period the ROCE decreases.

0.5818279 1.6105223

Standard

Error Observations 6

MS 20.638205 2.593782

F 7.9568002

P-value 0.0112177

APP

-0.1502162

0.0532534

0.0477902

-0.2980714

-0.002361

-0.002361

R square is 3 percent which clearly states that the regressed model is a model be which clearly states that 3 percent of the changes in ROCE can be explained by the average payment period Standard error shows that how much is the data scattered which is around 6.41which means that around 6.5 percent of the data is scattered.

The x variable is in positive which clearly states that there is an direct relationship between average payment period and ROCE because an increase in the value of the average payment period will lead to an increase in the value of ROCE as the equation here is Y=13.56+0.283X X here stand for coefficient of average payment period The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be positive 0.188 which shows the direct relationship between the ROCE and APP This can also be studied by the scattered diagram above here we study the trend line between ROCE and AVERAGE PAYMENT PERIOD, the trend line is moving UPWARDS which clearly states that with the increase in the average payment period the ROCE increases

The net working capital refers to CURRENT ASSETS CURRENT LIABILITIES , these are the short term assets and the short term liabilities of the company , higher the liquidity in the company lower is the profit or ROCE Our analysis shows that :

Regression Statistics Multiple R R Square Adjusted Square Standard Error Observations R 0.5594042 0.8046884 0.6475234

1.6531391 6

MS 20.081858 2.7328689

F 7.3482697

t Stat 0.7758306

P-value 0.4811652

0.0003635

0.0001341

2.7107692

0.0534947

-8.808E-06

0.0007359

-8.808E06

0.0007359

R square is 41 percent which clearly states that the regressed model is a good model because it clearly states that 41 percent of the changes in ROCE can be explained by the change in Net Working Capital Standard error shows that how much is the data scattered which is around 5 which means that around 5 percent of the data is scattered.

The x variable is in negative which clearly states that there is an inverse relationship between Net Working Capital and ROCE because an increase in the value of the average collection period will lead to a decline in the value of ROCE as the equation here is Y=63.2601.959X X here stand for coefficient of Net Working Capital The p value is around 0.004 which shows that the value of the slope is significant. The lesser the p value the more significant is the slope Correlation is coming out to be negative 0.64271 which shows the inverse relationship between the ROCE and Net Working Capital This can also be studied by the scattered diagram above here we study the trend line between ROCE and Net Working Capital, the trend line is moving downwards which clearly states that with the increase in the Net

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