A Regression Analysis Is Said to Suffer from Multicollinearity When

question 25

Multiple Choice

A regression analysis is said to suffer from multicollinearity when:

• A) the dependent and independent variables move in the same direction.
• B) two or more explanatory variables tend to move together.
• C) the degrees of freedom in the regression is equal to zero.
• D) the explanatory variables vary independently of one another.
• E) the correlation coefficient between the predicted and the explanatory variables is equal to zero.

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Definitions:

Net Cash Inflows

The difference between all cash received and all cash payments over a period, reflecting the net change in cash position.

Fixed Asset

Long-term tangible assets, such as machinery, buildings, and land, used in the operation of a business that are not expected to be consumed or converted into cash within a year.

Net Income

The net income of a company, which is the remaining amount of total revenues after deducting all expenses, taxes, and costs.

Net Cash Flows

The difference between a company's cash inflows and cash outflows during a specific period, reflecting its ability to generate cash.