Cierra, Inc. is attempting to assess its degree of economic exposure in euros. In order to do so, it has applied regression analysis to determine whether the percentage change in its total cash flow is related to the percentage change in the euro. A ____ and statistically significant slope coefficient resulting from this analysis implies that the cash flows are ____ related to the percentage changes in the euro.

Question

Quizplus · Accepted Answer

A positive slope coefficient indicates a positive relationship between the percentage change in cash flow and the percentage change in the euro. This means that as the euro strengthens, Cierra's cash flow increases. A statistically significant slope coefficient indicates that this relationship is not due to chance, but rather is a true relationship. Therefore, a positive and statistically significant slope coefficient would support the idea that Cierra has economic exposure to the euro.