Interpret Multiple Regression Coefficients A) for Companies That Give the Same Average Annual Bonus

question 11

Multiple Choice

Interpret multiple regression coefficients.
-In determining the best companies to work for, a number of variables are considered,
Including size, average annual pay, and turnover rate, etc. Employee surveys are often
Conducted in order to assess aspects of the organization's culture, such as trust and
Openness to change. A sample of 33 companies was randomly selected and data
Collected on the average annual bonus and turnover rate (%) . A questionnaire was also
Administered to the employees of each company to arrive at a trust index (measured on a
Scale of 0 - 100) . Based on the results shown below, the correct interpretation of the
Regression coefficient for the variable Trust Index is $$\begin{array}{l}\text { Dependent Variable is Turnover Rate }\\\begin{array} { l r r r r } \text { Predictor } & \text { Coef } & \text { SE Coef } & \mathbf { T } & \mathbf { P } \\\text { Constant } & 12.1005 & 0.7826 & 15.46 & 0.000 \\\text { Trust Index } & - 0.07149 & 0.01966 & - 3.64 & 0.001 \\\text { Average Bonus } & - 0.0007216 & 0.0001481 & - 4.87 & 0.000\end{array}\end{array}$$

• A) For companies that give the same average annual bonus, an increase of 10 points on the trust index is associated with a decrease of 0.72% in turnover rate, on average.
• B) An increase of 10 points on the trust index results in a decrease of 7.2% in turnover rate.
• C) Holding average annual bonus constant, increasing the trust index by 10 points will decrease the turnover rate by 7.2%.
• D) For companies that give the same average annual bonus, an increase of 10 points on the trust index is associated with an increase of 0.72% in turnover rate, on average.
• E) None of the above.

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Definitions:

Units

Units commonly refer to a measure of quantity or to the basic amounts of inventory, production, or other quantifiable elements in business operations.

Return On Capital Employed (ROCE)

A financial ratio that measures a company's profitability and efficiency in using its capital; calculated as EBIT (Earnings Before Interest and Taxes) divided by capital employed.

Capital Structure

The composition of a company's liabilities and shareholders' equity including debt, equity, and any other types of financing.

Tax Bracket

A range of income over which the tax rate is constant.