Tdist formula and the sample evidence

Reference no: EM13990341

A company's cost-to-income ratio is a measure of its ability to control its costs. The lower the ratio (expressed as a percentage), the better the company's ability is to control its cost. An analyst recorded the cost-to-income ratio (as a percentage) of 50 randomly selected public companies to study their ability to control their operating cost. Assume that cost-to-income ratios across public companies are normally distributed.

(a) Compute the mean (average) and standard deviation of the sample of the cost- to-income ratios using the Descriptive Statistics option in Data Analysis. Interpret the profile of this measure across the sample of public companies surveyed.

(b) Find the 95% confidence interval for the mean cost-to-income ratio for all public companies. (Hint: Tick the Confidence Level for Mean box in Descriptive Statistics).

(d) As a rule of thumb, a public company's cost-to-income ratio should not exceed 75%. Use the TDIST formula and the sample evidence from (a) to determine what percentage of all public companies are likely to be in violation of the rule of thumb.

Reference no: EM13990341

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