BASIC ECNOMATRICS

ZAINAB BIBI
F17-0837
BS(ACCOUNTING &FINANCE)6T
SUBMITTED TO
SIR MUHAMMAD KAMRAN
KHAN
SUBMISSION DATE:
15 JULY, 2020
 SHAHTAJ TEXTILE LIMITED

NET PROFIT NET SALES

2000 4218154 34296124
2001 321964 19764291
2002 7799055 2420458
2003 83107441 122829086
2004 235649 3476282
2005 27680 1093753
2006 358340 1632954
2007 29960 1768946
2008 -345000 2001106
2009 38886 2432058
2010 107780 2841300
2011 204734 4039701
2012 87280 3985000
2013 112897977 4208752278
2014 711775484 4036097201
2015 582441 3291892
2016 98860 3155887
2017 105979 3498781
2018 681011 39253225
2019 188049 4787646
 Model 1: OLS, using observations 2000-2019 (T = 20)
Dependent variable: NETPROFIT

Coefficient Std. Error t-ratio p-value

Const 4.66184e+06 2.45837e+07 0.1896 0.8517

NETSALES 0.0975467 0.0188487 5.175 6.36e-05***

Mean dependent var 46126086 S.D. dependent var 1.60e+08

Sum squared Resid 1.94e+17 S.E. of regression 1.04e+08
R-squared 0.598063 Adjusted R-squared 0.575733
F(1, 18) 10.19025 P-value(F) 0.005048
Log-likelihood −396.5114 Akaike criterion 797.0229
Schwarz criterion 799.0143 Hannan-Quinn 797.4116
rho −0.485691 Durbin-Watson 2.971062

EQUATION:
^NETPROFIT = 4.66e+06 + 0.0975*NETSALE....(a)

(standard errors in parentheses)

(2.46e+07) (0.0188)
T = 20,
R-squared = 0.598
Expalination of model 1st

4.66184e+06 and 0.0975467 shows the values used in the above

equation(a).theses values labeled the heading of Coefficient in model( 1)these
coefficients are also termed as parameters.the standard error column quantifies
the uncertainty of the coefficents(4.66184e+06 and 0.0975467).from model I
interpret the results that standard error is relatively small compared to its
parameters or coefficient which tells that coefficient is quite precise,is also
indicated by the high t and the small p value . Similarly R-squared number in this
model is 59%. This shows that our model predicts or forecasts the future profit
suggesting that explanatory variable in the model predicted 59% of variation in
the dependent variable. Now in model I have an intercept of
4.66184e+06 i-e 18.77 which tells that if the change in net sales forecast to be
zero our profit would be 19 units and finally the net sales( B) or correlation of
coefficient of(0.097units) 9.7% tells that if net sales were increased by 1% profit
would be likely to go upto(0.097units) 9.7%.

GRAPH:

Analysis of Variance:

Sum of squares df Mean square

 Regression 2.89346e+017 1 2.89346e+017

Residual 1.94459e+017 18 1.08033e+016

Total 4.83805e+017 19 2.54634e+016

R^2 = 2.89346e+017 / 4.83805e+017 = 0.598063

F(1, 18) = 2.89346e+017 / 1.08033e+016 = 26.7831 [p-value 6.36e-005]

Mean dependent var 1740713 S.D. dependent var

Sum squared Resid 1.15e+13 S.E. of regression
R-squared 0.290489 Adjusted R-squared
F(1, 18) P-value(F)
Log-likelihood Akaike criterion
Schwarz criterion Hannan-Quinn
rho Durbin-Watson
ICI PAKISTAN LIMITED

NET PROFIT NET SALE

2000 237657 1252561

2001 395081 2277656
2002 1200057 12183561
2003 766244 18127295
2004 2846368 17639480
2005 1420443 18476457
2006 692215 19574118
2007 1784800 2964228
2008 2068872 3957958
2009 2044738 28429897
2010 2428826 35129980
2011 1935713 40114908
2012 502727 34681563
2013 1158701 36267761
2014 1702216 38233477
2015 2125708 37515328
2016 2843186 36954437
2017 3296091 41363695
 2018 3059704 49107580
2019 2304912 58328849

Model 1: OLS, using observations 2000-2019 (T = 20)

Dependent variable: NETPROFIT

Coefficient Std. Error t-ratio p-value

const 947457 342406 2.767 0.0127 **

NETSALES 0.0297891 0.0109733 2.715 0.0142 **

Mean dependent var 1740713 S.D. dependent var 922340.8

Sum squared resid 1.15e+13 S.E. of regression 798199.8
R-squared 0.290489 Adjusted R-squared 0.251071
F(1, 18) 7.369575 P-value(F) 0.014201
Log-likelihood −299.1275 Akaike criterion 602.2549
Schwarz criterion 604.2464 Hannan-Quinn 602.6437
rho 0.290348 Durbin-Watson 1.365349

EQUATION

^NETPROFIT = 9.47e+05 + 0.0298*NETSALES

(standard errors in parentheses)
(3.42e+05) (0.0110)
T = 20,
 R-squared = 0.290

GRAPH:

Analysis of Variance

Sum of squares df Mean square

Regression 4.69533e+012 1 4.69533e+012

Residual 1.14682e+013 18 6.37123e+011

Total 1.61635e+013 19 8.50713e+011

R^2 = 4.69533e+012 / 1.61635e+013 = 0.290489

 F(1, 18) = 4.69533e+012 / 6.37123e+011 = 7.36957 [p-value 0.0142]

Model assumptions
To be able to get reliable estimators for the coefficients and to be able to interpret the
results from a random sample of data, we need to make model assumptions. There
are five assumptions associated with the linear regression model (these are called
the Gauss-Markov assumptions):
1. Linearity: The relationship between the dependent variable, independent
variable, and the disturbance is linear.
2. Random sample: We have a random sample of size n {(xi, yi): i=1,..,n)}, where
the observations are independent of each other.
3.No perfect collinearity: None of the independent variables is constant, and
there are no exact linear relationships among the independent variables.
4. Exogeneity: The disturbance term has an expected value of zero given any
value of the independent variable. In other words E(ε|xi)=0.
5.Homoskedasticity: The disturbance term has the same variance given any value
of the independent variable. In other words Var(ε|xi)= σ².