A regression analysis of company profits and the amount of money the company spent on advertising produced a R² = 0.72.Which of these is true?
I.This model can correctly predict the profit for 72% of companies.
II.72% of the variance in company profit can be accounted for by the model.
III.On average, companies spend about 72% of their profits on advertising.

Question

Quizplus · Accepted Answer

II. The given value, R² = 0.72, represents the coefficient of determination (R-squared), which indicates that 72% of the variance in company profit can be explained by the amount spent on advertising. It does not imply prediction accuracy for individual companies (I) or a direct spending ratio of profits on advertising (III).

A Regression Analysis of Company Profits and the Amount of Money