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PROBLEM FORMULATION The problem here is the decrease in the interest of the investors in the shares of the company. The purpose of the research is to find out the reasons for the decrease in the volumes of shares.
VARIABLES DEPENDENT INDEPENDENT Investment Return on investment – volume of shares = net profit / share capital Debt-equity ratio = total liability/ shareholders equity
Return on investment A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment.
Debt-equity ratio A measure of a companys financial leverage calculated by dividing its total liabilities by stockholders equity. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt.
RESEARCH HYPOTHESIS We assume that volume of shares is more dependent on debt-equity ratio then return on investment as high debt-equity ratio means high liability i.e., higher risk and in turn higher profitability. ROI may not be regular, so volume of shares are less dependent on it.
DATA CALCULATION For this we have considered the balance sheet of year 2009,10 and 2011 of HUL. table (5).xlsx http://www.moneycontrol.com/financials/hindustanunilever/ratios/HU
A regression is a statistical analysis assessing the association between two variables. It is used to find the relationship between two variables. Regression Formula: Regression Equation(y) = a + bx Slope(b) = (NΣXY - (ΣX)(ΣY)) / (NΣX2 - (ΣX)2) Intercept(a) = (ΣY - b(ΣX)) / N
VOLUME OF SHARES (X) DEBT-EQUITY RATIO (Y)3263300 03690600 05449700 0.2 RESULTSlope (b) 0Y-intercept (a) -0.33825Regression equation -0.34+0x
VOLUME OF SHARES (Y) RETURN ON INVESTMENT (X)3263300 87.573690600 85.255449700 121.34 RESULTSlope (b) 48161.95334Y-intercept (a) -569284.10952Regression equation -569284.11+48161.95x
VOLUME OF SHARES (X) RETURN ON INVESTMENT (Y)3263300 87.573690600 85.255449700 121.34 RESULTSlope (b) .00002Y-intercept (a) 28.09768Regression equation 28.1+0x
INTERPRETATION OF THE RESEARCH Volume of shares = f ( return on investment) The volume of shares is dependent on return on investment by 28.1%. Investment = f (debt-equity ratio) The volume of shares is related to debt- equity ratio by -0.34%.
INTERPRETATION OF THE RESEARCH Through this research, we find out that the volume of shares is influenced by both return on investment and debt-equity ratio but debt-equity ratio has more impact on it compared to return on investment. Hence, our research hypothesis stands true.
METHODOLOGY We have used a primary method of data collection “EXPERIMENT”. It is a relative experiment i.e., having more then one value of independent variable. Statistical tool used – regression.
OTHER FACTORS AFFECTING INVESTMENT Past market trend Investors risk appetite Investment horizon Investible surplus Investment need Expected return