As the CEO of a civil engineering company that has multi-billion dollar worth pr

Question

As the CEO of a civil engineering company that has multi-billion dollar worth projects across the globe, you decided to hire a financial analyst to model the liquid (cash) assets of your company so that you may make healthy predictions about the next year. The analyst came up with a model between the Prospect of the company (P) and several descriptive parameters such as Number of large contracts (N), Unit labor cost (U), Optimism in global markets (O), and current Assets of the company (A). The model is very simple yet the financial analyst thinks it is very powerful:

Explanation / Answer

To model the liquid (cash) assets, ANALYST should incorporate all the potential variables affecting the asset by data exploration. We need to check the significance of these independent variables based on p-values. Also, R-sq will give us degree of determination. More the r-sq better the model is.

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