If We Draw a Straight Line Through the Points in a Scatter

question 5

True/False

If we draw a straight line through the points in a scatter diagram and most of the points fall close to the line,there must be a positive relationship between the two variables.

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Definitions:

Basic Earning Power

A measure of a company's operating profitability relative to its assets; calculated as EBIT (Earnings Before Interest and Taxes) divided by total assets.

Business Risk

The exposure a company or investor faces due to uncertainties in the market or failures in executing its operational strategies, affecting its profitability.

Dividend Irrelevance Theory

A theory proposing that an organization's dividend policy is not relevant to the value of the company or its cost of capital, assuming perfect market conditions.

Cost of Capital

The rate of return a company must earn on its investments to maintain its market value and satisfy its creditors and shareholders.