The Residuals Plot for a Linear Model Is Shown

question 777

Multiple Choice

The residuals plot for a linear model is shown. Which is true?

• A) The linear model is okay because the association between the two variables is fairly strong.
• B) The linear model is okay because approximately the same number of points are above the line as below it.
• C) The linear model is no good since some residuals are large.
• D) The linear model is no good because of the curve in the residuals.
• E) The linear model is no good since the correlation is near 0.

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Definitions:

Indirect Method

The indirect method is an approach used in cash flow statements to adjust net income for the changes in non-cash accounts to calculate cash flow from operating activities.

Net Income

Represents the earnings of a company after subtracting all costs and expenses from total revenue, indicating the company's financial health.

Accrued Liabilities

Expenses that have been incurred but have not been paid at the end of the accounting period.

Indirect Method

A accounting technique used to prepare the cash flow statement, converting net income into net cash flow from operating activities by adjusting for non-cash items and changes in working capital.