Kenneth McCoin, CFA, is a challenging interviewer. Last year, he handed each job applicant a sheet of paper with the information in Exhibit 1, and he then asked several questions about regression analysis. Some of McCoin’s questions, along with a sample of the answers he received to each, are given below. McCoin told the applicants that the independent variable is the ratio of net income to sales for restaurants with a market cap of more than $100 million and the dependent variable is the ratio of cash flow from operations to sales for those restaurants. Which of the choices provided is the best answer to each of McCoin’s questions?

Exhibit 1:

Regression Analysis
Regression Statistics
R2 0.7436
Standard error 0.0213
Observations 24
Source df Sum of Squares Mean Square F p-Value
Regression 1 0.029 0.029000 63.81 0
Residual 22 0.010 0.000455
Total 23 0.040
Coefficients Standard Error t-Statistic p-Value
Intercept 0.077 0.007 11.328 0
Net income to sales (%) 0.826 0.103 7.988 0
Question

Q. Is the relationship between the ratio of cash flow to operations and the ratio of net income to sales significant at the 0.05 level?