Question

You manage the food and beverage stands at BC Place. Give an example of when you would use the following methods to forecast staffing levels. Explain your answer:

1. Trend analysis
2. Ratio analysis
3. Multiple regression

Answer 1

You manage the food and beverage stands at BC Place

TREND ANALYSIS

Trend analysis is a technique used in technical analysis that attempts to predict the future stock price movements based on recently observed trend data. Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future.

RATIO ANALYSIS

Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational efficiency, and profitability by studying its financial statements such as the balance sheet and income statement. Ratio analysis is a cornerstone of fundamental equity analysis.

MULTIPLE REGRESSION:

Multiple regression generally explains the relationship between multiple independent or predictor variables and one dependent or criterion variable. A dependent variable is modeled as a function of several independent variables with corresponding coefficients, along with the constant term. Multiple regression requires two or more predictor variables, and this is why it is called multiple regression.

The multiple regression equation explained above takes the following form:

y = b1x1 + b2x2 + … + bnxn + c.

Here, bi’s (i=1,2…n) are the regression coefficients, which represent the value at which the criterion variable changes when the predictor variable changes.

Example :

In the Process of managing food and Beverage at BC place it should be done considering Trend Analysis,Ratio Analysis & Multiple Regression .

1)Trend Analysis:

• Trend analysis into the Managing Food & Beverages the Market scenario as weell as the Competitor pricing strategy can be Adopt for Acquiring new customer.
• To calculate the change over a longer period of time.
• To develop a sales trend follow the steps below:
• Select the base year. For each line item, divide the amount in each nonbase year by the amount in the base year and multiply by 100

2)Ratio Analysiss:

• Ratios are comparison points for companies. They evaluate stocks within an industry. Likewise, they measure a company today against its historical numbers. In most cases, it is also important to understand the variables driving ratios as management has the flexibility to, at times, alter its strategy to make its stock and company ratios more attractive. Generally, ratios are typically not used in isolation but rather in combination with other ratios. Having a good idea of the ratios in each of the four previously mentioned categories will give you a comprehensive view of the company from different angles and help you spot potential red flags

1. Liquidity Ratios

Liquidity ratios measure a company's ability to pay off its short-term debts as they become due, using the company's current or quick assets. Liquidity ratios include the current ratio, quick ratio, and working capital ratio.

2. Solvency Ratios

Also called financial leverage ratios, solvency ratios compare a company's debt levels with its assets, equity, and earnings, to evaluate the likelihood of a company staying afloat over the long haul, by paying off its long-term debt as well as the interest on its debt. Examples of solvency ratios include: debt-equity ratios, debt-assets ratios, and interest coverage ratios.

3. Profitability Ratios

These ratios convey how well a company can generate profits from its operations. Profit margin, return on assets, return on equity, return on capital employed, and gross margin ratios are all examples of profitability ratios.

4. Efficiency Ratios

Also called activity ratios, efficiency ratios evaluate how efficiently a company uses its assets and liabilities to generate sales and maximize profits. Key efficiency ratios include: turnover ratio, inventory turnover, and days' sales in inventory.

5. Coverage Ratios

Coverage ratios measure a company's ability to make the interest payments and other obligations associated with its debts. Examples include the times interest earned ratio and the debt-service coverage ratio.

6. Market Prospect Ratios

These are the most commonly used ratios in fundamental analysis. They include dividend yield, P/E ratio, earnings per share (EPS), and dividend payout ratio. Investors use these metrics to predict earnings and future performance.

3)Multiple Regression:

• There should be proper specification of the model in multiple regression. This means that only relevant variables must be included in the model and the model should be reliable.
• Linearity must be assumed; the model should be linear in nature.
• Normality must be assumed in multiple regression. This means that in multiple regression, variables must have normal distribution.
• Homoscedasticity must be assumed; the variance is constant across all levels of the predicted variable.

There are certain terminologies that help in understanding multiple regression. These terminologies are as follows:

• The beta value is used in measuring how effectively the predictor variable influences the criterion variable, it is measured in terms of standard deviation.
• R, is the measure of association between the observed value and the predicted value of the criterion variable. R Square, or R2, is the square of the measure of association which indicates the percent of overlap between the predictor variables and the criterion variable. Adjusted R2 is an estimate of the R2 if you used this model with a new data set.