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As sales revenue has a direct relationship with the amount of profit that the company makes, our company Bulls and Bears Financial Ltd. has also analysed profitability of Fosters group on annual basis. Now the amount of profit made by the company has a direct impact in the amount of dividends paid back to the shareholders, so we have forecasted the value of earnings per share as well. Earnings/share Forecasting value will help us in knowing if it would be profitable to invest in this company or not.
Profitability
Our company has used Fosters profit data for past ten years i.e. from 1998-2007 for analysing and forecasting the profitability of the company for the year 2008. Linear Regression Line model was used to forecast the profit value for the year 2008. Using this model we plotted the graph between sales and net profits.
Linear Regression Line Model for Profitability
From the above graph of Profitability, we can clearly see that the data points are scattered whereas there is a linear trend in the forecast value. This clearly indicates that although the correlation (r) between the two variables is positive i.e. 0