Identify the Four Predictive Variables Chosen by the Profitability Regression

question 23

Essay

Identify the four predictive variables chosen by the profitability regression model used by La Quinta Inns. Identify some that were tested but not included in the final model.

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Definitions:

Operating Leverage

Refers to the extent to which fixed costs are used in a company's operations; high operating leverage means a larger proportion of fixed costs, leading to greater potential for profit variability with changes in sales volume.

Pretax Net Income

The amount of income that a company has earned before any taxes have been deducted.

CVP Analysis

Cost-Volume-Profit Analysis, a financial tool used to determine how changes in cost and volume affect a company's operating income and net income.

Pre-Tax Net Income

The income earned by a business before the deduction of tax expenses.