Department of Finance Faculty of Business Studies University of Dhaka

Title of the Study: Applications of Statistics On Banking and Pharmaceutical Companies

Course Title: Business Statistics II Course Code: F-207

SUBMITTED TO
Ms. Nusrat Khan Lecture Department of Finance University of Dhaka

SUBMITTED BY
Section A BBA 16th Batch Department of Finance University of Dhaka

Date of Submission: November 2, 2011

ABOUT US

SL NO. 1 2 3 4 5 6 7 8 9

NAME Md. Rabin Islam Mohammad Junaid Shawon Md. Zahidul Islam Md. Rashed Karim Rashid Muntasir Md. Zahirul Islam Khan Md. Sanowar Hossain Ariful Hossain Md. Mahbubur Rahman Khan

ID 16-013 16-017 16-051 16-125 16-165 16-171 16-175 16-262 16-263

LETTER OF TRANSMITTAL

November 2, 2011 Ms. Nusrat Khan Lecturer Department of Finance University of Dhaka Dear Madam, It is our satisfaction to submit this report, which you assigned us. The topic of our report is Applications of Statistics On Banking and Pharmaceutical Companies as a part of the requirements under the Course of Business Statistics II. Working on this report was a great opportunity for us to acquire knowledge about many applications of descriptive & inferential statistics. We are thankful to you, as you allowed us to perform the study and to submit the report. We hope that the report will meet the standard and will serve its purpose.

Sincerely Yours,

Md. Zahidul Islam On behalf of the group

ACKNOWLEDGEMENT
For the completion of this study we cant deserve all praise. There were a lot of people who helped us by providing valuable information, advice and guidance for the completion of this Report in the scheduled time. Course Report is an essential part of BBA program as one can gather practical knowledge within the short period of time by observing and doing the works of chosen organizations. In this regard our Report has been arranged. At first we like to pay our heartiest thanks to ALMIGHTY, for helping us to do all the works with perfection. Having prepared this report, we would like to give our thanks to the Department of Finance and all the faculties of the department as they have given us the opportunity to be a part of the BBA Program. We also thank them for preparing such a curriculum as a part of which we have been able to accomplish this report. We would like to pay our gratitude to our supervising Course teacher Ms. Nusrat Khan who instructed us in the right way and gave us proper guidelines for preparing this Report.

E X E C U T I V E S U M MA R Y
We have prepared this report on the study of Applications of Statistics On Banking and Pharmaceutical Companies in which we have discussed the applications of some statistical tools in business and commerce. These tools are Time series & Forecasting Multiple regression & correlation analysis

The report starts with introducing the origin, objectives & methodology of the report at the first part. The origin section describes the background of the preparation of this report, while the objectives section explains the objectives of the preparation of this report. The methodology section deals with the means of preparation of this report and the processes that we have followed. Then the report describes various important topics of time series analysis & multiple regression & correlation analysis in the theoretical knowledge at the second part. Thereafter at the third part there are Company profiles of four selected companies from two different industries. Then we have shown the application of some statistical tools on these companies.

I N T R O DU C T I O N
Origin of the Report:
This Report is generated under the academic supervision of Ms. Nusrat Khan, Lecturer, Department of Finance, University of Dhaka. The report is a prerequisite for the completion of the course Business Statistics II under BBA Program. Each student has to work on a report within a predetermined group over the period of this Program. The assigned topic for our Report is Applications of Statistics On Banking and
Pharmaceutical Companies

Objectives of the Report:

The objective of preparing this report is to fulfill the requirement of the course Business Statistics II through gaining the theoretical knowledge about various important topics of business statistics and viewing the applications & tabular presentation of those topics.

Methodology of the Report:

The report in this study is basically an analytical one. Here, both the primary and the secondary data have been used. The primary data has been collected from lectures given on this topic in the classroom. The secondary sources of data are our textbook, reference book, annual reports of the selected company & different websites. We used the sophisticated data editor SPSS for our analyses.

THEORETICAL KNOWLEDGE
Time Series & Forecasting:
A time series is a collection of data recorded over a period of time; weekly, monthly, quarterly or yearly. Time series can be used by management to make current decisions & plans based on long-term forecasting.

Components of a Time-series:
Secular trend: The smooth long-term direction of a time series. Cyclical variation: The rise & fall of a time series over periods longer than one year. Seasonal variation: Patterns of change in a time series within a year. Irregular variation: Episodic & residual fluctuations.

Linear Trend:
The long-term trend of many business series, such as sales, exports & production often approximates a straight line. The equation to describe this growth is: = a+ bt Where: is the projected value of the y variable for a selected value of t. a is the Y-intercept. It is the estimated value of y when t = 0. b is the slope of the line or the average change in for each increase of one unit in t. t is any value of time that is selected.

Growth Rate: It indicates that during the period of 200X to 200Y dependent variable
increases or decreases at an average of growth rate per year.

Acceleration Rate: It indicates that in the years to come growth rate will be increased
or decreased at an average rate of acceleration rate per year of the previous years growth rate.

Multiple Regression & Correlation Analysis: Multiple Regressions: The general descriptive form of a multiple regression equation
is
y = a + b1X1+ b2X2++b3X3+. + bkXk

where a is the Y-intercept when all Xs are zero, b refers to the sample regression coefficient & X refers to the value of the various independent variables.

Multiple Standard Error of Estimate: It is similar to the standard deviation. It is

measured in the same units as the dependent variables. It is based on squared deviations from the regression equation.

Coefficient of multiple determinations: The coefficient of multiple determination

reports the percent of the variation in the dependent variable explained by the set of independents variable. It may range from 1 to 0. It is also based on squared deviations from the regression equation. It is found by the following equation:
=

ANOVA Table: An ANOVA table summarizes the multiple regression analysis. It

reports the total amount of the variation in the dependent variables & divides this variation into that explained by the set of independent variables & that not explained. It also reports the degrees of freedom associated with the independent variables, the error variation & total variation.

Correlation Matrix: A correlation matrix shows all possible simple correlation

coefficients between pairs of variables.

Global Test: A global test is used to investigate whether any of the independent
variables have significant regression coefficients. The test statistics is the F distribution.

Individual Regression Coefficient: The test for individual variables determines

which independent variables have nonzero regression coefficients. The variables that have zero regression coefficients are usually dropped from the analysis. The test statistics is the t distribution with n - (k + 1) degrees of freedom.

COMPANY PROFILE
Established as the first private sector bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, NBL, as a financial institution, automated all its branches with computer networks in accordance with the competitive commercial demand of time. Moreover, considering its forthcoming future, the infrastructure of the Bank has been rearranging. The expectation of all class businessmen, entrepreneurs and general public is much more to NBL. At present we have 145 branches under our branch network National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception, it was the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity.

At present, NBL has been carrying on business through its 130 branches and 15 SME / Agri Branches (total 145 service locations) spread all over the country. Since the very beginning, the bank has exerted much emphasis on overseas operations and handled a sizable quantum of home bound foreign remittance. It has drawing arrangements with 415 correspondents in 75 countries of the world, as well as with 37 overseas Exchange Companies located in 13 countries. NBL was the first domestic bank to establish agency arrangements with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. This has meant that the expatriates can remit their hard-earned money to the country with much ease, confidence, safety and speed

NATIONAL BANK- MULTIPLE LINEAR ANALYSIS AND INTERPRETATION

REGRESSION

In our report, we have been told to draw a Multiple linear regression between following variables where, The only dependent variable - Share price The 4 independent variables.1. Net income 2. Return on equity 3. Price earnings ratio 4. Dividend per share

NATIONAL BANK-DATA SUMMARY

We were required to collect last 10 years data. That is given belowYEAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 SHARE PRICE 431.5 615.25 650.0 1261.0 3200.0 3000.0 3099.25 7491.25 7789.25 12051.5 NET PROFIT 11.34 17.43 16.25 22.57 25.0 26.0 24.65 26.29 26.06 27.34 DPS 30.0 40.0 50.0 70.0 70.0 70.0 70.0 70.0 75.0 85.0 ROE 5.34 4.12 4.16 5.55 12.27 10.43 23.14 40.31 32.5 36.09 P/E 37.56 67.23 72.56 105.56 145.59 192.57 242.13 358.02 438.67 594.48

Data Analysis:
Now we are prepared to use SPSS to compute all the statistics needed for the analysis. The Regression equation intercept is labeled as constant in the SPSS:

Coefficients Standardiz ed Unstandardized Coefficients Coefficient s

95% Confidence Interval for B Lower Correlations

Collinearity Statistics Toleranc e VIF

Upper ZeroBound order Partial Part 3227.31 5 .009 .001

Model 1 (Constant)

B -404.174 3.834 -9.230 15.083 20.391

Std. Error 1412.711 199.776 66.177 54.317 4.703

Beta

Sig.

Bound

-.286 .786 -4035.664 .005 .019 .985 -.041 -.139 .895 .055 .278 .792 .963 4.335 .007

ROE DPS PE N.P

-509.707 517.375 .717

.067 14.837 .061 16.500 .130 7.720 .105 9.558

-179.343 160.883 .743 -.062 -.010 -124.542 154.709 .912 8.300 32.481 .986 .123 .020 .889 .312

a. Dependent Variable: S.Price

In this case the estimated regression equation is =-404.174+3.834X1-9.230 X2+15.083 X3+20.391X4 Here, r =0.987 This is the multiple regressions and it indicates a positive relation between variables. It is close to 1 so we can say, there is strong positive relationship. Here, b1=3.834 it means that if the independent variable (Net income) increases by 1 taka then the dependent variable will increase by 3.834 taka. We can interpret other b by the same. We can now estimate the share price in next year as shown before. The regression coefficient and their algebraic signs, also provide information about their individual relationship with the next year share price. The regression coefficient for Net income is .005659. It is positive and shows a positive relationship between share price and net income. It is logical. Cause, net income and share price tend to move in same direction.

MULTIPLE STANDARD ERROR OF ESTIMATE

in the National Bank`s case we get the standard error of estimation is an amount equal to 307.3944.we interpret this result as, It is the typical error when we use the equation to predict the cost. First, the units are same as the dependent variable that is taka. Second, we expect the residuals to be approximately normally distributed. So, about 68% of the residuals will be within 307.3944and about 95% within 2(307.3944) =614.7888. here in National Bank`s case, the values are very close to this guideline.

THE ANOVA TABLE

ANOVA Model 1 Regression Residual Total Sum of Squares 1.332E8 3530134.188 1.367E8 df 4 5 9
b

Mean Square 3.330E7 706026.838

F 47.163

Sig. .000
a

a. Predictors: (Constant), N.P, ROE, PE, DPS b. Dependent Variable: S.Price

Here, total variation is divided into 2 components: 1. variation in the dependent variable by the regression model( the independent variables) 2. The residual of error variation. That is the random error due to sampling. There are 3 categories identified in the 1st or source column in the Anova table: i. Regression ii. Residual iii.Total The 2nd column is labeled df in Anova table. It is the degree of freedom. Here total degrees of freedom are n-(k+1) = 10-(4+1) =5 The heading SS in the 3rd column of Anova table is the sum of squares or the variation. total variation= SStotal=1.367E8 Residual error= SSE= 3530134.188 Regression variation= 1.332E8 The 4th column heading MS or mean square. is obtained by dividing the SS quantity by the matching df. Thus the MSR , the mean square regression is equal to SSR/K. Similarly, MSE , the mean square error is SSE/ n-(k+1). (3530134.188/5)

Sig. level:0.05

4.76

Calculate value:47.163

COEFFICIENT OF DETERMINATION
r2= SSR total/SS total =.974 We interpret this value as, independent variables explain or account for, 97.4% of the variation in share price.
Model Summary
b

Change Statistics R Model 1 R .987

a

Adjusted R Square .954

Std. Error of the Estimate 840.25403

R Square Change .974

F Change df1 df2 47.163 4 5

Sig. F Change .000

DurbinWatson 2.660

Square .974

a. Predictors: (Constant), N.P, ROE, PE, DPS b. Dependent Variable: S.Price

ADJUSTED COEFFICIENT OF DETERMINATION

The number of independent variable in a multiple linear regression makes the coefficient of determination larger. Each new variable causes the predictions to be more accurate. That in turn makes SSE smaller, and SSR larger. To balance the effect of the number of independent variable has on coefficient of determination the statistical software or here SPSS used an adjusted coefficient of determination. Here, the value is = .954

INFERENCES IN MULTIPLE LINEAR REGRESSIONS

Multiple regression analysis is not only a way to describe the relationship between a dependent variable and several independent variables. The least square method also has the ability to draw inferences or generalization about the relationship for an entire population. the model of relationship=+ 1X1+2X2++kXk here, the coefficients are reported as Greek letter. - ,measures the strength of influence of independent variable on dependent variable. =198.7785+.005X1-.041 X2+.055 X3+.963 X4 in our equation, 1= .005 2= -.041 3= .055 4= .963 4 is the largest. So, we can say that return on equity has the highest influence on share price.

TESTING THE MULTIPLE REGRESSION MODEL

The critical value if F is found in Appendix b.4.using the table for the .05 significance level, move horizontally to 4 degrees of freedom in numerator and down to 5 degrees of denominator we found the critical value= 5.19 . if computed value exceeds this, the null hypothesis will be rejected. here, we found f value- 1.2387. so the decision is not to reject null hypothesis.

EVALUATING INDIVIDUAL REGRESSION COEFFECIENTS

The critical value for a t is in appendix b.2. For a 2 tailed test with 5 degrees of freedom using .05 significance level, null hypothesis is rejected if t is less than 2.571 or greater than 2.571. Here t-stat for all independent variable is not in rejection area except dividend per share. Thus 4 couldn`t be 0. We can say, none of the independent variables are significant predictor for share price except dps. The dividend per share is an important predictor for share price. We can drop others and rerun the analysis with dividend per share as independent variable. Here t=.547

COMPANY PROFILE
AB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st December 1981 as Arab Bangladesh Bank Limited and started its operation with effect from April 12, 1982. AB Bank is known as one of leading bank of the country since its commencement 29 years ago. It continues to remain updated with the latest products and services, considering consumer and client perspectives. AB Bank has thus been able to keep their consumers and clients trust while upholding their reliability, across time. In spite of adverse market conditions, AB Bank Limited which turned 28 this year, concluded the 2008 financial year with good results. The Banks consolidated profit after taxes amounted to Taka 230 cr which is 21% higher than that of 2007. The asset base of AB grew by 32% from 2007 to stand at over Tk 8,400 cr as at the end of 2008. AB Bank believes in modernization. The bank took a conscious decision to rejuvenate its past identity an identity that the bank carried as Arab Bangladesh Bank Limited for twenty five long years. As a result of this decision, the bank chose to rename itself as AB Bank Limited and the Bangladesh Bank put its affirmative stamp on November 14, 2007. AB Bank commits to nation to take a lead in the Banking sector through not only its strong financial position, but also through innovation of products and services. It also ensures creating higher value for its respected customers and shareholders. The bank has focused to bring services at the doorstep of its customers, and to bring millions into banking channels those who are outside the mainstream banking arena. Innovative products and services were introduced in the field of Small and Medium Enterprise (SME) credit, Womens Entrepreneur, Consumer Loans, Debit and Credit Cards (Local & International), ATMs, Internet and SMS Banking, Remittance Services, Treasury Products and Services, Structured Finance for Corporate, strengthening and expanding its Islamic Banking activities, Investment Banking, specialized products and services for NRBs, Priority Banking, and Customer Care. The Bank has successfully completed its automation project in mid 2008. It envisages enabling customers to get banking services within the comfort of their homes and offices. AB is recognized as the peoples choice, catering to the satisfaction of its cliental. Their satisfaction is ABs success.

AB BANK-DATA SUMMARY We collected 10 years data below from 2000 to 2009 of AB Bank Ltd. AB Bank Ltd.
YEAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 SHARE PRICE 109.02 213.35 254.58 211.66 257.25 315.14 566.91 1709.43 1934.14 831.85 NET PROFIT 158.86 263.28 23.69 17.12 90.07 162.45 532.19 1903.49 2300.62 3417.18 DPS 18.0 25.0 15.0 5.0 5.0 10.0 30.0 200.0 15.0 25.0 ROE 17.87 24.45 2.07 1.53 7.24 10.64 20.61 42.19 34.2 33.88 P/E 4.38 2.79 53.0 53.89 20.95 11.68 9.59 10.0 7.97 6.24 EPS 38.75 64.22 5.78 3.63 18.19 31.26 93.08 85.37 103.18 133.26

Data Analysis:
Descriptive Statistics Mean S.PRICE NP DPS ROE PE EPS 6.4033E2 8.8690E2 34.8000 19.4680 18.0490 57.6720 Std. Deviation 659.01034 1208.33008 58.65492 14.22683 19.29936 44.81578 N 10 10 10 10 10 10

Correlations S.PRICE Pearson Correlation S.PRICE NP DPS ROE PE EPS Sig. (1-tailed) S.PRICE NP DPS ROE PE EPS N S.PRICE NP DPS ROE PE EPS 1.000 .743 .582 .791 -.327 .657 . .007 .039 .003 .178 .020 10 10 10 10 10 10 NP .743 1.000 .345 .807 -.424 .868 .007 . .165 .002 .111 .001 10 10 10 10 10 10 DPS .582 .345 1.000 .633 -.224 .316 .039 .165 . .025 .267 .186 10 10 10 10 10 10 ROE .791 .807 .633 1.000 -.727 .885 .003 .002 .025 . .009 .000 10 10 10 10 10 10 PE -.327 -.424 -.224 -.727 1.000 -.695 .178 .111 .267 .009 . .013 10 10 10 10 10 10 EPS .657 .868 .316 .885 -.695 1.000 .020 .001 .186 .000 .013 . 10 10 10 10 10 10

Model Summary

Change Statistics R Model 1 R .879

a

Adjusted R Square .488

Std. Error of the Estimate 471.73463

R Square Change .772

F Change df1 df2 2.713 5 4

Sig. F Change .178

DurbinWatson 1.616

Square .772

a. Predictors: (Constant), EPS, DPS, PE, NP, ROE b. Dependent Variable: S.PRICE

Our findings from regression analysis: R=.879; this suggests that there is very strong relationship among dependent variable that is share price and independent variables such as net income, DPS, EPS, ROE and P/E ratio.

R2=.772; this indicates 77.2% of dependent variables: share price can be explained by independent variables: net income, DPS, EPS, ROE, P/E ratio.

Coefficients Standardiz ed Unstandardized Coefficients Coefficient s

95% Confidence Interval for B Lower Upper Bound 3204.574 -.917 -17.960 -79.882 -31.918 -38.220 1725.574 1.058 .743 .099 .047 -.093 .313 .242 -.116 Correlations Zeroorder Partial Part

Collinearity Statistics Tolera nce VIF

Model 1 (Constant)

B 739.500

Std. Error 887.853 .356 5.670 54.533 18.094 11.713

Beta

Sig.

Bound

-.833 .452 .130 .199 .852 -.198 -.391 .715 1.544 1.312 .260 .536 1.012 .369 -.388 -.487 .652

NP DPS ROE PE EPS

.071 -2.219 71.526 18.319 -5.700

.134 7.474 .224 4.473 .041 24.344 .203 4.932 .090 11.144

13.522 .582 -.192 222.934 .791 68.555 -.327 .548 .452

26.821 .657 -.236

a. Dependent Variable: S.PRICE

Coefficients Co-efficient and constant of regression:

i. ii. iii. iv. v. vi. vii.

Regression equation Y = -739.50+ .071x1-2.219x2+71.526X3+18.319X4-5.70X5 Constant a= -739.50 indicates that share price is equal to -739.50 tk irrespective of the independent variables. b1=.071 suggests that for each million tk increase in net income share price is increased by tk .071 m. b2=-2.219 suggests that for each additional % increase in DPS share price is decreased by 2.219%. b3=71.526 suggests that for each percent increase in ROE share price is increased by 71.526%. b4=18.319 suggests that for each time increase in P/E ratio share price is increased by 18.319 times. b5=-5.70 suggests that for each additional % increase in EPS share price is decreased by 5.70%

1=.130, 2=-0.198, 3=1.544, 4=0.536 and 5=-.388 Beta measures strength of influence of the independent variable over the dependent variable. Among the Betas 3 is the highest so that we can say upon the share price influence ROE is the strongest.

ANOVA Model 1 Regression Residual Total Sum of Squares 3018517.397 890134.226 3908651.623 df

Mean Square 5 4 9 603703.479 222533.556

F 2.713

Sig. .178
a

a. Predictors: (Constant), EPS, DPS, PE, NP, ROE b. Dependent Variable: S.PRICE

With df=5 and df=4 table value of F=6.26 and calculated value of F=2.713 where F<F table value means all regression co-efficient are zero that is say for AB bank share price none of the independent variable have the ability to explain the variation in the dependent variable.

Fig:1

COMPANY PROFILE

The Company started its operations as Pfizer (Bangladesh) Limited in 1972. For the next two decades it continued as a highly successful subsidiary of Pfizer Corporation. However, by the late 1990s the focus of Pfizer had shifted from formulations to research. In accordance with this transformation, Pfizer divested its interests in many countries, including Bangladesh. Specifically, in 1993 Pfizer transferred the ownership of its Bangladesh operations to local shareholders, and the name of the company was changed to Renata Limited.

In a gesture of corporate charity, Pfizer donated shares so that, along with a partial payment from the SAJIDA Foundation, 51% ownership of Renata Limited would be held by the Foundation. Today SAJIDAs microfinance and micro-insurance programs support over 107,120 members and their families; thus far cumulative loan disbursement totals BDT 5,750 million. Currently, SAJIDAs health program covers over 1 million beneficiaries by delivering services through two 70 bed hospitals, panel doctors in SAJIDAs micro finance branches, and mobile health teams. To date, the SAJIDA Foundation holds the majority ownership in Renata Limited.

RENATA LIMITED-DATA SUMMARY

We collected 10 years data below from 2000 to 2009 of Renata Pharmaceuticals
Year
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Market Share Price

450.5 615.25 650.0 1261.0 3200.0 3000.0 3099.25 6491.25 7789.25 12051.5

Renata Limited ROE DPS

12.34 17.43 16.25 22.57 25.0 26.0 23.65 26.29 26.06 25.34 25.0 40.0 50.0 70.0 70.0 70.0 70.0 70.0 75.0 80.0

P/E
4.34 4.12 4.16 5.55 12.27 10.43 23.14 40.31 32.5 35.09

NP
35.56 67.23 72.56 105.56 145.59 192.57 242.13 358.02 438.67 590.48

Where market price is dependent variable and ROE, DPS, P/E, and NP are independent variable.

Data Analysis:
Model Summary
b

Change Statistics R Model 1 R .990

a

Adjusted R Square .964

Std. Error of the Estimate 724.80515

R Square Change .980

F Change df1 df2 60.819 4 5

Sig. F Change .000

DurbinWatson 2.493

Square .980

a. Predictors: (Constant), NP, ROE, PE, DPS b. Dependent Variable: S.Price

INTERPRETATION

OF

THE

COEFFICIENT

OF

MULTIPLE

DETERMINATIONS (R2)
The model summary shows some important indicators of the explaining power of the model. The R-square value shows the percent of variation in the dependent variable is explained by the set of independent variables. In this case, r-square value of .980 or 98.0% means that the independent variables (return on equity, dividend per share, price earnings ratio, and net income) explain 98.0 percent of change in share price.

INTERPRETATION

OF

ADJUSTED

COEFFICIENT

OF

DETERMINATION (R2adj):
On the other hand, the adjusted r-square value shows the percent of variation in the dependent variable is explained by the statistically significant independent variables. So in this case, an adjusted r-square value of .964 or 96.4% means that the statistically significant independent variables explain 96.4 percent of the variation in labor productivity and it also indicates the model has the strong predictive power. If we compare R-square (.980) to the adjusted R-square (.964), the difference in this case is small.

ANALYSIS OF VARIANCE (ANOVA)

ANOVA Model 1 Regression Residual Total Sum of Squares 1.278E8 2626712.517 1.304E8 df 4 5 9
b

Mean Square 3.195E7 525342.503

F 60.819

Sig. .000
a

a. Predictors: (Constant), NP, ROE, PE, DPS b. Dependent Variable: S.Price

Now we are testing the ability of the independent variables X1, X2Xk to explain the behavior of the dependent variable y. this test is called global test. It mainly investigates whether it is possible all the independent variables have zero regression coefficients. We will test whether the independent variable (DPS, net income, P/E ratio) effectively estimates the market price of share. In testing hypothesis, we first state the null hypothesis and the alternate hypothesis. We have 4 independent variables such as b1, b2, b3, b4 are simple regression coefficients. The corresponding coefficients in the population are given in the symbol 1, 2, 3, 4. The null hypothesis is Ho: 1= 2= 3= 4 = 0 The alternate hypothesis is
H1: Not all the s are 0

If the null hypothesis is true, it implies the regression coefficients is 0 and logically are of no use in estimating the dependent variable. We have to search some for other independent variable to predict share price. To test null hypothesis that the multiple regression are all 0, we have to find out a critical value. From appendix B.4 in our test book and we have used 0.05 significant level. Here the degree of freedom in numerator is 4 because there are 4 independent variables and the degree of denominator is 5 founded by {n-(k+1)} =10-(4+1) =5. So the critical value is 5.41. The region where Ho is not rejected and the region where Ho is rejected are shown in the following diagram.

Region where Ho is not rejected

Region of rejection (0.05 level)

Calculated value: 60.819 4.76

Continuing with the global test, the decision tool is not to reject the null hypothesis. The computed value of f is less than or equal 4.76. If the computed value is more than 4.76 then we reject the Ho.
SSR/k

The value of F is found from the following equation:

F=

SSE/[m-(k+1)]

= 60.819 The computed value of F is 60.81 which is in the rejection region. The null hypothesis that the multiple regression coefficients are 0 is therefore rejected. This means that sum of the independent variables have the ability to explain the variation in the dependent variable.

Evaluating individual regression coefficient:

Our next step is to test the independent variables individually to determine which regression coefficients may be 0 and which are not. If a could be equal to 0, it indicates that this particular independent variable is of no value in explain any variation in the dependent value. If there are coefficients for which Ho cant be rejected. We may want to eliminate coefficient from regression equation. We will now conduct four separate test of hypothesis: For ROE For NP Ho: 4 = 0 H1 4 0 We will test the hypothesis at 0.05 significant level. The alternate hypothesis stated indicates that the test is two tail. The test statistic follows t distribution with n-(k+1) degrees of freedom. The number of sample observation is n=10. The number of independent variables are k=4. Thus there are 5 degrees of freedom. The critical value in Appendix B.2 for a two tailed test with degrees of freedom using 0.05 significant level Ho is rejected if t is less than -2.571 or more than 2.571.
Coefficients Unstandardized Coefficients Standardized Coefficients
a

For DPS

For P/E ratio

1 = 0 1 0

2 = 0 2 0

3 = 0 3 0

95% Confidence Interval for B Lower Upper Bound Correlations Zero-

Collinearity Statistics

Model

Std. Error 1387.980 175.092 49.956 46.542 3.774

Beta

t -.440 .092 .405 -.584 -.862

Sig.

Bound

order Partial Part Tolerance

VIF

1 (Constant) -610.976 ROE DPS PE NP 70.914 -29.198 -40.138 24.041

.678 -4178.892 2956.941 .702 .584 .428 .001 -379.175 -157.615 -159.778 14.340 521.003 99.219 79.503 33.743 .663 .688 .880 .988 .178 .026 .077 12.912 .075 13.349 .132 7.570 .122 8.211

-.136 -.151

-.253 -.037 -.360 -.055 .944 .404

1.158 6.370

a. Dependent Variable: S.Price

The regression model is Y= -610.976 + 70.914X1 -29.198X2 -40.138 X3 +24.041 X4 The intercept value of -610.976 indicates the regression intersect the Y-axis at -610.976 when X1, X2, X3, and X4 are 0.

b1 of 70.914indicates that for each increase in 1% ROE, share price will increase by 70.914Tk. b2 of -29.198 indicates that for each increase in 1tk. DPS, share price will decrease by 29.198Tk. b3 of -40.138 indicates that for each increase in 1tk. Price Earnings ratio, share price will decrease by 40.138 Tk. b4 of 24.041 indicates that for each increase in 1 million tk., Net Profit share price will increase by 24.041Tk. As b1 is highest, it means that influence of Net Profit is fluctuating over increasing market share price.

The sample distribution of coefficient follows the t distribution n-(k+1). Hence we are able to test independent variables individually to determine whether the regression coefficients differ from 0. The computed t ratio is 0.405 for ROE, -.584 for DPS, 0.862 for P/E ratio and 4.335 for Net Profit. The regression coefficient for Net Profit is not 0 because it is right to the 2.571 and ROE, P/E ratio and DPS fall into the region within 6.370. So independent variable P/E ratio, DPS and ROE have no effect over dependent variable. It can be dropped from the analysis. So we can conclude that only Net Profit makes an impact over changing market share price.

COMPANY PROFILE
The company was incorporated in 1976 and commenced operations in 1980 with the manufacturing and marketing of products of Bayer AG, Germany and Upjohn Inc., USA under licensing arrangements. In 1983, the company started manufacturing its own formulations and it launched export operation in 1992. In 2005 Beximco Infusions Ltd, the company that produces intravenous fluids, was amalgamated with the parent company. In the same year it completed the state-of-the-art oral solid dosage plant in compliance with the US FDA and UK MHRA standards, which has been approved by major global regulatory bodies. Today Beximco Pharma is the largest exporter of pharmaceuticals in the country and the only company to win National Export Trophy (Gold), the highest national accolade for export, for record three times. The company is the largest producer of Metered Dose Inhalers (MDIs) in the country, and the first to produce CFC free inhalers. BPL is also the first company to produce anti-retroviral drugs (ARVs) locally. As a public limited company, its shares are actively traded in Dhaka Stock Exchange and Chittagong Stock Exchange, and Beximco Pharma has the unique distinction of being the only company in the country listed on AIM of London Stock Exchange. Beximco Pharmaceuticals Ltd (BPL) is a leading manufacturer of pharmaceutical formulations and Active Pharmaceutical Ingredients (APIs) in Bangladesh. The company is the largest exporter of pharmaceuticals in the country and its state-of-the-art manufacturing facilities are certified by global regulatory bodies of Australia, Gulf nations, Brazil, among others. The company is consistently building upon its portfolio and currently producing more than 400 products in different dosage forms covering broader therapeutic categories which include antibiotics, antihypertensives, antidiabetics, antireretrovirals, anti asthma inhalers etc, among many others.

BEXIMCO PHARMA-DATA SUMMARY

We collected 10 years data below from 2000 to 2009 of Beximco Pharmaceuticals Ltd.
Beximco Pharmaceuticals Ltd.
YEAR 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 SHARE PRICE 49.75 54.88 42.83 35.03 57.1 78.25 52.41 54.85 104.48 157.0 NET PROFIT 398.3 401.78 341.68 207.14 329.38 489.26 470.66 353.07 545.34 624.74 DPS 20.0 15.0 15.0 20.0 30.0 15.0 15.0 15.0 30.0 15.0 ROE 10.58 9.64 7.7 4.46 6.81 7.17 5.92 4.28 5.22 5.74 P/E 9.4 8.62 8.57 13.42 19.55 9.09 13.06 21.04 46.45 37.72 EPS 7.12 5.74 4.88 2.96 4.71 6.36 4.11 2.8 3.61 4.13

Data Analysis:
Descriptive Statistics Mean S.PRICE NP DPS ROE PE EPS 68.6580 4.1614E2 19.0000 6.7520 18.6920 4.6420 Std. Deviation 36.68643 120.08351 6.14636 2.09492 13.25298 1.42170 N 10 10 10 10 10 10

Correlations S.PRICE Pearson Correlation S.PRICE NP DPS ROE PE EPS Sig. (1-tailed) S.PRICE NP DPS ROE PE EPS N S.PRICE NP DPS ROE PE EPS 1.000 .863 .050 -.221 .774 -.094 . .001 .446 .270 .004 .398 10 10 10 10 10 10 NP .863 1.000 -.075 .011 .593 .157 .001 . .419 .488 .035 .333 10 10 10 10 10 10 DPS .050 -.075 1.000 -.125 .486 -.133 .446 .419 . .366 .077 .357 10 10 10 10 10 10 ROE -.221 .011 -.125 1.000 -.516 .916 .270 .488 .366 . .063 .000 10 10 10 10 10 10 PE .774 .593 .486 -.516 1.000 -.494 .004 .035 .077 .063 . .073 10 10 10 10 10 10 EPS -.094 .157 -.133 .916 -.494 1.000 .398 .333 .357 .000 .073 . 10 10 10 10 10 10

Model Summary

Change Statistics R Model 1 R .954

a

Adjusted R Square .798

Std. Error of the Estimate 16.47965

R Square Change .910

F Change df1 df2 8.120 5 4

Sig. F Change .032

DurbinWatson 1.678

Square .910

a. Predictors: (Constant), EPS, DPS, NP, ROE, PE b. Dependent Variable: S.PRICE

Our findings from regression analysis: R=.954; this suggests that there is very strong relationship among dependent variable that is share price and independent variables such as net income, DPS, EPS, ROE and P/E ratio. R2=.910; this indicates 91% of dependent variables: share price can be explained by independent variables: net income, DPS, EPS, ROE, P/E ratio.

Coefficients Unstandardized Coefficients Std. Model B Error 37.977 .134 1.779 Beta t Standardized Coefficients

95% Confidence Interval for B Lower Sig. Bound Upper Bound Correlations Zero-

Collinearity Statistics

order Partial Part Tolerance

VIF

1 (Constant) 10.597 NP DPS .007 -2.749

.279 .794 -94.845 116.039 .024 .055 .959 -.461 1.546 .197 -.363 -7.687 .378 2.189 .863 .028 .008 .231 .132 .117 8.517 .253 3.960

.050 -.611

ROE

-6.389 3.228 19.392

7.251 1.514 14.799

-.365 -.881 .428 -26.521 1.166 2.132 .100 -.975

13.743 -.221 -.403 7.431 .774

.131 7.647 .075 13.339 .068 14.670

PE EPS

.729 .319 .548 .196

.751 1.310 .260 -21.697

60.481 -.094

a. Dependent Variable: S.PRICE

Coefficients Co-efficient and constant of regression:

i.

Regression equation Y = 10.597+ .007x1-2.749x2-6.389X3+3.228X4+19.392X5 Constant a= 10.597indicates that share price is equal to 10.597 tk irrespective of the independent variables. b1=.007 suggests that for each million tk increase in net income share price is increased by tk .007 m. b2=-2.749 suggests that for each additional % increase in DPS share price is decreased by 2.749%. b3=-6.389 suggests that for each % increase in ROE share price is decreased by 6.389%. b4=3.228 suggests that for each time increase in P/E ratio share price is increased by 3.228 times. b5=19.392 suggests that for each additional % increase in EPS share price is increased by 19.392%

ii. iii. iv. v. vi. vii.

1=.024, 2=-0.461, 3=-.365, 4=1.166 and 5=.756 Beta measures strength of influence of the independent variable over the dependent variable. Among the Betas 4 is the highest so that we can say upon the share price influence of P/E ratio is the strongest.

ANOVA Model 1 Regression Residual Total Sum of Squares 11026.735 1086.315 12113.051 df

Mean Square 5 4 9 2205.347 271.579

F 8.120

Sig. .032
a

a. Predictors: (Constant), EPS, DPS, NP, ROE, PE b. Dependent Variable: S.PRICE

With df=5 and df=4 table value of F=6.26 and calculated value of F=8.120 where F>F table value means all regression co-efficient are not zero that is to say for Beximo Pharmaceuticals share price some of the independent variable do have the ability to explain the variation in the dependent variable.

CONCLUSION
The aim of the report was to establish and define the association between the share prices of a company and the performance indicators. Throughout the analysis of the report it was possible to successfully establish such a relation between them and to define them to significant precision. Although the analysis is based on only the past records it, nevertheless, would help us to predict the future trend of share prices in response to the performance indicators of the particular companies. The analysis is also a helpful in understanding of the effectiveness of the company performance on its share prices. It not only relates to the only four companies we have dealt with, but the overall capital market.

BIBLIOGRAPHY

1. Text Books
i) ii) Statistical Techniques in Business & Economics by Douglas A. Lind, William G. Marchal, Samuel A. Wathen. Principles of Statistics

2. Websites
i) ii) iii) iv) National Bank Ltd (www.nblbd.com) AB Bank Ltd. (www.abbank.com.bd) Renata Pharmaceuticals (www.renata.com) Beximco Pharmaceuticals Ltd. (www.beximco.com)