# CORRELATION ANALYSIS

Correlation measures the association between two variables. That is, it indicates if the
value of one variable changes reliably in response to changes in the value of the other variable.
The correlation coefficient can range from -1.0 to +1.0. A correlation of -1.0 indicates that the
value of one variable decreases as the value of the other variable increases. A correlation of +1.0
indicates that when the value of one variable increases, the other variable increases. ositive
correlation coefficients less than 1.0 mean that an increasing value of one variable tends to be
related to increasing values of the other variable, but the increase is not regular ! that is, there
may be some cases where an increased value of one variable results in a decreased value of the
other variable. A correlation coefficient of 0.0 means that there is no association between the
variables" a positive increase in one variable is not associated with a positive or negative change
in the other.
#ormula for calculating \$arl earson%s coefficient of correlation"-
Table No 1
Nature of Relationship between Select Variable: C !ower tech In"ia !ri#ate Li\$ite"
%&1%'%&1(
Variables r
&epreciation 0.'()
**
+i,uidity 0.--.
/0ternal 1ource of #und 2atio -0.-30
Cash #low 0.))4
**
5nvestment 2atio -0..34
5nterest 0..16
Ta0 -0.(()
&ividend 0.0')
* 1ignificant at five per cent level ** 1ignificant at one per cent level
7f the eight variables selected to identify the relationship with the retained earnings two
variables are significantly associated with retained earnings. 1imple correlation analysis has been
used to ascertain the relationship.
.
Table No %
Nature of Relationship between Select Variable: C !ower tech In"ia !ri#ate Li\$ite"
Lt" %&11'%&1%
Variables r
&epreciation 1
+i,uidity -0.-''
/0ternal 1ource of #und 2atio 0.)6-
**
Cash #low 0.6(1
**
5nvestment 2atio 0..-.
5nterest 0.(4(
Ta0 0.463
&ividend 0.311*
* 1ignificant at five per cent level ** 1ignificant at one per cent level
7f the total variables selected to identify the relationship with the retained earnings three
variables are significantly associated with retained earnings. 1imple correlation analysis has been
used to ascertain the relationship.
Table No (
Nature of Relationship between Select Variable: C !ower tech In"ia !ri#ate Li\$ite"
%&1& ' %&11
Variables r
&epreciation 0.0'.
+i,uidity 0.401
/0ternal 1ource of #und 2atio -0.0('
Cash #low 0..06
5nvestment 2atio 0.1)-
5nterest 0.0-0
Ta0 -0.-'1
&ividend 0.''6
*
* 1ignificant at five per cent level ** 1ignificant at one per cent level
7f the variables selected to identify the relationship with the retained earnings one
variables are significantly associated with retained earnings. 1imple correlation analysis has been
used to ascertain the relationship.
Table No )
Nature of Relationship between Select Variable: C !ower tech In"ia !ri#ate Li\$ite"
%&&* ' %&1&
Variables r
&epreciation 0.'4-
**
+i,uidity -0..-(
/0ternal 1ource of #und 2atio 0.-.)
Cash #low 0.646
**
5nvestment 2atio 0..0-
5nterest -0.0.4
Ta0 0.3()
*
&ividend 0.440
* 1ignificant at five per cent level ** 1ignificant at one per cent level
7f the total variables selected to identify the relationship with the retained earnings three
variables are significantly associated with retained earnings. 1imple correlation analysis has been
used to ascertain the relationship.
Table No +
Nature of Relationship between Select Variable: C !ower tech In"ia !ri#ate Li\$ite"
%&&, ' %&&*
Variables r
&epreciation 0.'0.
+i,uidity 0.'01
/0ternal 1ource of #und 2atio -0.'4-
*
Cash #low 0.)00
**
5nvestment 2atio -0.36(
**
5nterest 0.4('
Ta0 0.61.
**
&ividend 0.''(
*
* 1ignificant at five per cent level ** 1ignificant at one per cent level
7f the variables selected to identify the relationship with the retained earnings five
variables are significantly associated with retained earnings. 1imple correlation analysis has been
used to ascertain the relationship.