Inspection of data and comprehensive reporting using Correlation,

Regression/Time Series Analysis

2220426 ISHPREET ARORA

2220441 VANSHITA CHHAJED
2220456 NAVEEN AGGARWAL

Business Statistics
(BBA232)

BACHELOR OF BUSINESS ADMINISTRATION

Bengaluru, India
 INDEX

S. No. Particulars Page No.

1 Introduction 1

2 Bajaj Finance limited 2

3 Muthoot Finance Limited 3

4 Objectives & Methods Used 4

5 Calculations: Bajaj Finance 7

6 Calculations: Muthoot Finance 12

7 Analysis 17

8 Interpretation 18

9 Conclusion 20

10 Appendix i
 INTRODUCTION

FINANCIAL SERVICES INDUSTRY

● Both individuals and companies receive financial assistance from the financial services
sector. Numerous financial firms, including banks, traders, moneylenders, account
organizations, real estate agents, and insurance agents, make up this sector of the economy.
● In terms of revenue and market capitalization, the financial management sector is
undoubtedly the most significant component of the largest economy in the world. This
sector is dominated by enormous aggregates, although they also encompass many
components of the more modest organization.
● The International Monetary Fund (IMF) Accounting and Payment Department defines cash
management as a cycle in which a client or organization raises a resource of money. For
instance, a provider of installment payment systems offers financial support for checking
and moving funds. involving both the payer and the beneficiary. Credit cards, charge cards,
checks, and accounts settled through online commerce are included.

● Businesses in the money management sector keep an eye on cash. For instance, a financial
advisor oversees resources and offers guidance on the clients' behalf. This guide works on
the growth of funds among savers and funders of safeguards and other commodities; it does
not directly address speculation or anything else. This assistance is not a signing resource;
it is a temporary task.
● Orders are not money goods. They are objects. Mortgages may appear to be helpful, but
they go beyond the scope of the fundamental contract. Examples of financial commodities
include stocks, bonds, credits, product resources, land, and protection agreements.

1
BAJAJ FINANCE LIMITED

Bajaj Finance Ltd. operates as a non-banking financial company in India. It offers durable,
lifestyle, digital product, two and three-wheeler, retailer, developer, used car, vendor, light
engineering, corporate, and warehouse finance; personal, gold, home, business, working capital,
and professional loans; and loan against fixed deposits, shares, properties, and securities. The
company provides extended warranty; retail EMI; e - commerce; lease rental discounting; EMI
cards, and co-branded credit cards and wallets, as well as offers investment services, such as fixed
deposits and mutual funds. The company was formerly known as Bajaj Auto Finance Limited
and changed its name to Bajaj Finance Limited in September 2010. The company was
incorporated in 1987 and is based in Pune, India. Bajaj Finance Ltd. is a subsidiary of Bajaj
Finance Limited.

2
MUTHOOT FINANCE LIMITED:

Muthoot Finance Limited is a gold financing company. The organization is a non-banking

financial business (NBFC) that offers loans (finance) in exchange for gold jewelry as security.
The business is divided into the financing and the power generation areas. For a fair duration, the
organization offers personal and business loans (backed by gold jewelry) primarily to those
without formal credit who need the money for short-term working capital needs. The company
provides domestic money transfer services, instant money transfer services, foreign inward
money transfer services, insurance broking, personal loans, home loans, business loans, collection
services, microfinance, windmill power generation, white label automated teller machines, and
gold loans. In India, the organization maintains a network of more than 5,190 branches.

3
OBJECTIVES

● Examine the relationship between the variables using correlation.

● Inference based on the relationship established.
● This project will require us to select and inspect a data set of two different industries of
your choice.
● Along with the inspection, based on the data set you are required to fit a trend line and
forecast variables for the coming 5 years.
● An analysis should be conducted to predict the trend line along with an interpretation of
the results of the analysis.

METHOD USED

● Correlation
● Scatter Diagram
● Regression/Trend Analysis

4
 DATA DESCRIPTION

● The chosen variables for this report are the revenues and expenses of the companies and
the number of observations under it are of five years.
● Key financial indicators that provide light on a company's financial success and general
health include its revenue and expenses.
● Revenue is the term used to describe the earnings a business makes from its operations,
such as the selling of goods or services. This revenue is a vital part of a business's financial
stability since it enables it to cover costs, make investments in new projects, and make
money for its shareholders. A business that sees its income rise over time often means that
it is expanding and growing.
● Contrarily, expenses refer to the costs a business incurs in order to make money. These
expenses may include rent, utilities, marketing charges, and other expenses related to
operating the business. Monitoring expenses is crucial since it enables businesses to find
areas for cost-cutting, efficiency improvements, and profit enhancement. A business that
has high expenses in comparison to revenue may have trouble making a profit and may
need to take measures to cut expenses or boost sales.

5
Bajaj Finance Limited:

Given Below is the Revenue and expense of Bajaj Finance Ltd. for last 10 years:

Year Expenses (₹ crore) Revenue (₹ crore)

2013 2239.77 3111.37
2014 2982.17 4073.33
2015 4061.29 5418.23
2016 5418.91 7383.48
2017 7171.45 9988.97
2018 9272.86 13329.22
2019 11363.97 17399.27
2020 17026.02 23834.15
2021 18183.45 23546.33
2022 19285.09 27871.48

Muthoot Finance Ltd:

Given Below is the Revenue and expense of Muthoot Finance Ltd. for last 10 years:

Year Expenses (₹ crore) Revenue (₹ crore)

2013 3,875.69 5,387.14
2014 3,753.88 4,947.44
2015 3,296.78 4,324.64
2016 3,558.26 4,875.02
2017 3,825.72 5,746.70
2018 3,488.47 6333.15
2019 3,803.81 6880.63
2020 4,665.38 8722.79
2021 5,567.85 10574.36
2022 5,789.04 11098.39

6
CALCULATIONS:

Bajaj Finance Ltd:

Correlation by Karl Pearson’s method

Year Expenses Dx Dx2 Dy Dy2 Dx. Dy
Revenue (₹
(₹ crore) crore) (Y)
(X)
2013 2239.77 3111.37 -7460.7 55662462.3 -10484.213 109918722.2 78219861.49
2014 2982.17 4073.33 -6718.3 45135931.1 -9522.253 90673302.2 63973618.95
2015 4061.29 5418.23 -5639.2 31800666.9 -8177.353 66869102.09 46113794.46
2016 5418.91 7383.48 -4281.6 18331995.8 -6212.103 38590223.68 26597665.66
2017 7171.45 9988.97 -2529 6396083.79 -3606.613 13007657.33 9121297.394
2018 9272.86 13329.22 -427.64 182874.259 -266.363 70949.24777 113906.9406
2019 11363.97 17399.27 1663.47 2767139.09 3803.687 14468034.79 6327326.821
2020 17026.02 23834.15 7325.52 53663272.6 10238.567 104828254.2 75002847.81
2021 18183.45 23546.33 8482.95 71960474.6 9950.747 99017365.86 84411709.17
2022 19285.09 27871.48 9584.59 91864403.8 14275.897 203801235.2 136828648.2
Total 0 377765304.2 0 741244846.8 526710676.9

Direct method: 𝑅 = ∑ 𝑑𝑥𝑑𝑦

√ 𝑑𝑥2 √ 𝑑𝑦2

R= 526710676.9

√741244846.8 × √377765304.2

R= 3.148

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PROBABLE ERROR

P.E. = 0.6745 × 1 - r2
√n

= 0.6745 × 1 – (3.148)2
√10

= 0.6745 × 9.909904
3.162278

= 0.6745 × 3.133787

= 2.113739

6 P.E. = 6 × 2.113739 = 12.68244

SCATTER DIAGRAM

BAJAJ FINANCE
Expenses (₹ crore) Revenue (₹ crore)

30000

25000

20000

15000

10000

5000

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

8
 TIME SERIES ANALYSIS (LEAST SQUARES METHOD)

Revenues of Bajaj Finance:

YEARS Revenues (Y) X X2 XY Yc = a + bx

2013 3111.37 -4.5 20.25 -14001.165 362.9961818

2014 4073.33 -3.5 12.25 -14256.655 3303.57103
2015 5418.23 -2.5 6.25 -13545.575 6244.145879
2016 7383.48 -1.5 2.25 -11075.220 9184.720727
2017 9988.97 -0.5 0.25 -4994.485 12125.29558
2018 13329.22 0.5 0.25 6664.610 15065.87042
2019 17399.27 1.5 2.25 26098.905 18006.44527
2020 23834.15 2.5 6.25 58865.825 20947.02012
2021 23546.33 3.5 12.25 83419.525 23887.59497
2022 27871.48 4.5 20.25 125421.660 26828.16982
135955.83 0 82.5 242597.425 135955.83

Mean = Total of Y
N

= 135955.83
10

= 13595.583

Y= a + bx

a = ∑Y = 135955.83 = 13595.583
N 10

b = ∑xy = 135955.83 = 2940.574848

∑x2 82.5

9
 Therefore; Y= 13595.583 + 2940.574848x

Expenses of Bajaj Finance:

YEARS Expenses (Y) X X2 XY Yc = a + bx

2013 2239.77 -4.5 20.25 -10078.965 302.9412727

2014 2982.17 -3.5 12.25 -10437.595 2391.287212
2015 4061.29 -2.5 6.25 -10153.225 4479.633152
2016 5418.91 -1.5 2.25 -8128.365 6567.979091
2017 7171.45 -0.5 0.25 -3585.725 8656.32503
2018 9272.86 0.5 0.25 4636.430 10744.67097
2019 11363.97 1.5 2.25 17045.955 12833.01691
2020 17026.02 2.5 6.25 42565.050 14921.36285
2021 18183.45 3.5 12.25 63642.075 17009.70879
2022 19285.09 4.5 20.25 86782.905 19098.05473
97004.98 0 82.5 172288.54 97004.98

Mean = Total of Y
N

= 97004.98
10

= 9700.498

Y= a + bx

a = ∑y = 97004.98= 9700.498
N 10

b= ∑xy = 97004.98= 2088.345939

∑x2 82.5

10
 Therefore; Y= 9700.498 + 2088.345939x

FORECASTED VALUES:

Year X Revenues Expenses

29768.7447
2023 5.5 21186.4007
32709.3195
2024 6.5 23274.7466
35649.8944
2025 7.5 25363.0925
38590.4692
2026 8.5 27451.4385
41531.0441
2027 9.5 29539.7844

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CALCULATIONS:

MUTHOOT FINANCE LIMITED:

Correlation by Karl Pearson’s method

Expenses Revenue Dx Dx2 Dy Dy2 Dx. Dy
(₹ crore) (₹ crore)
(X) (Y)
2013 3,875.69 5,387.14 -286.80 82253.0928 -1,501.89 2255661.557 430737.901
2014 3,753.88 4,947.44 -408.61 166960.498 -1,941.59 3769756.195 793347.5723
2015 3,296.78 4,324.64 -865.71 749450.341 -2,564.39 6576075.557 2220009.475
2016 3,558.26 4,875.02 -604.23 365091.476 -2,014.01 4056220.168 1216918.817
2017 3,825.72 5,746.70 -336.77 113412.686 -1,142.33 1304908.69 384698.8424
2018 3,488.47 6333.15 -674.02 454300.264 -555.88 308998.1274 374670.4298
2019 3,803.81 6880.63 -358.68 128649.908 -8.40 70.492816 3011.460488
2020 4,665.38 8722.79 502.89 252900.364 1,833.76 3362690.408 922185.2455
2021 5,567.85 10574.36 1,405.36 1975042.35 3,685.33 13581686.69 5179228.361
2022 5,789.04 11098.39 1,626.55 2645671.41 4,209.36 17718745.28 6846749.433
Total 0.00 6933732.39 0.00 52934813.17 18371557.54

Direct method: 𝑅 = ∑ 𝑑𝑥𝑑𝑦

√ 𝑑𝑥2 √ 𝑑𝑦2

R= 18371557.54

√6933732.39 × √52934813.17

R= 0.958

PROBABLE ERROR

P.E. = 0.6745 × 1 - r2
√n

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= 0.6745 × 1 – (0.948)2
√ 10

= 0.6745 ×0.898704
3.162278

= 0.6745 × 0.284195

= 0.19169

6 P.E. = 6 × 0.19169= 1.150138

SCATTER DIAGRAM:

MUTHOOT FINANCE
Expenses (₹ crore) (X) Revenue (₹ crore) (Y)

12,000.00

10,000.00

8,000.00
AMOUNT

6,000.00

4,000.00

2,000.00

0.00
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
AXIS TITLE

13
 TIME SERIES ANALYSIS (LEAST SQUARES METHOD)

Revenues of Muthoot Finance:

Year Revenue X X2 XY Yc = a + bx

2013 5387.14 -4.5 20.25 -24242.130 3633.106364

2014 4947.44 -3.5 12.25 -17316.040 4356.644061
2015 4324.64 -2.5 6.25 -10811.600 5080.181758
2016 4875.02 -1.5 2.25 -7312.530 5803.719455
2017 5746.7 -0.5 0.25 -2873.350 6527.257152
2018 6333.15 0.5 0.25 3166.575 7250.794848
2019 6880.63 1.5 2.25 10320.945 7974.332545
2020 8722.79 2.5 6.25 21806.975 8697.870242
2021 10574.36 3.5 12.25 37010.260 9421.407939
2022 11098.39 4.5 20.25 49942.755 10144.94564
68890.26 0 82.5 59691.86 68890.26

Mean = Total of Y
N

= 68890.26
10

= 6889.026

Y= a + bx

a = ∑y = 68890.26= 6889.026
N 10

b= ∑xy = 59691.86= 723.537697

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 ∑x2 82.5

Y= 6889.026 + 723.537697x

Expenses of Muthoot Finance:

Year Expenses X X2 XY Yc= a +bx

2013 3875.69 -4.5 20.25 -17440.605 3149.024182

2014 3753.88 -3.5 12.25 -13138.580 3374.238364
2015 3296.78 -2.5 6.25 -8241.950 3599.452545
2016 3558.26 -1.5 2.25 -5337.390 3824.666727
2017 3825.72 -0.5 0.25 -1912.860 4049.880909
2018 3488.47 0.5 0.25 1744.235 4275.095091
2019 3803.81 1.5 2.25 5705.715 4500.309273
2020 4665.38 2.5 6.25 11663.450 4725.523455
2021 5567.85 3.5 12.25 19487.475 4950.737636
2022 5789.04 4.5 20.25 26050.680 5175.951818
41624.88 0 82.5 18580.17 41624.88

Mean = Total of Y
N

= 41624.88
10

= 4162.488

Y= a + bx

a = ∑y = 41624.88= 4162.488
N 10

B = ∑xy = 18580.17= 225.2141818

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 ∑x2 82.5

Y= 4162.488 + 225.2141818x

FORECASTED VALUES:

Year X Revenues Expenses

10868.4833 5401.1660
2023 5.5
11592.0210 5626.3802
2024 6.5
12315.5587 5851.5944
2025 7.5
13039.0964 6076.8085
2026 8.5
13762.6341 6302.0227
2027 9.5

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 ANALYSIS

● Scatter diagram is used to compare between two variables.

● Probable Error is used to help define the range of effective measurement increments.
● The obtained data is plotted on the graph to obtain the trend.
● The expenses of Bajaj Ltd tend to increase throughout the course of all ten years and also
the revenue of each year of the company is also significantly increasing.
● The expenses of Muthoot Finance Ltd increase each year except for the 2020 while the
revenues are increasing each year except 2014.
● By using Karl Pearson’s coefficient of correlation, we get the correlation between the two
variables at r. This shows that there is a very low degree of correlation among the two
variables.
● The probable error is used to find the accuracy of the result of coefficient
● Since r is less than the probable error, we can confirm that there is a very low degree of
correlation between the two variables.

17
 INTERPRETATION

We notice that the revenue and expenses of both the companies Bajaj and Muthoot Finance tend
to increase through the years. Muthoot Finance faces a shortage of revenue in 2014 and increase
in expenses in the year 2020.

An increase in revenue could be because of the following reasons:

 Increased lending activity: A finance company's ability to grow revenue by making

more loans to borrowers and earning more interest income.
 Higher interest rates: If interest rates climb, a finance company's existing loan portfolio
will generate more interest income, which will help boost revenue.
 Improved credit quality: A financing firm may be able to reduce loan losses and
increase revenue from interest income if it can improve the credit quality of its loan
portfolio.
 A decrease in expenses could be because of the following reasons:
 Lower funding costs: A finance firm can cut its interest expenditure and total cost of
capital if it can receive funding at a cheaper cost, such as through lower interest rates or
more favorable conditions from lenders.
 Enhanced operational effectiveness: A financing firm can minimize total costs if it can
streamline operations and cut costs related to staffing, technology, or other expenses.
 Reduced credit losses: A financing company's credit loss provision costs might be
decreased if it can cut its loan losses through better underwriting or collection procedures.

Decrease in the revenue of Muthoot Finance could be because of the following reasons:

 Reduced lending activity: A financing company's revenue may drop if it makes fewer
loans to borrowers and earns less interest income.

18
  Lower interest rates: If interest rates fall, a finance company's existing loan portfolio
may generate less interest income, which could also result in a drop in revenue.
 Credit quality deterioration: If a financing company's loan portfolio's credit quality
deteriorates, it may cause more loan losses and less interest income.
 Regulatory changes: Regulations could have an effect on a financing company's income
if they affect the lending criteria or interest rate caps that have an impact on the finance
sector.

Increase in the expenses of Muthoot Finance could be because of the following reasons:

Increased lending activity: If a financing company is lending more money to borrowers, it

could need to hire more people, invest in more technology, and use more staff members and
resources to deal with the increased number of loan applications. As a result, costs might go up.

Increased funding costs: If a financing firm cannot secure finance at favorable terms or rates, it
may be required to pay higher interest rates or other fees, which can raise its interest expenditure
and total cost of capital.

Compliance with regulatory standards: If there are new or stricter regulatory requirements for
the financing business, such as compliance with anti-money laundering or data privacy
legislation, it can raise the costs associated with compliance for a financing company.

The forecasted revenues of both the companies tend to increase over the period of five years and
also the expenses of both the companies are also predicted to increase over the next five years.

19
 CONCLUSION

● The correlation coefficient is an indicator of the strength of the linear relationship

between two different variables x and y. A linear correlation coefficient greater than
zero indicates a positive relationship. A value less than zero means a negative
relationship. Finally, a value of zero indicates that there is no relationship between
the two variables x and y.
● It is used to help in the determination of Karl Pearson’s coefficient of correlation If
the value of ‘r’ is less than P. E., then there is no evidence of correlation i.e., r is not
significant.
● If ‘r’ is more than 6 times the P. E. ‘r’ is practically certain.i.e., significant. By adding
or subtracting P. E. to ‘r’, we get the upper and Lower limits within which ‘r’ of the
population can be expected to lie.
● A scatter plot (or x-y graph) is a chart designed for expressing the relationship
between two variables or data points.
● Time series analysis is a method of analyzing data collected over intervals of time.
It is used when the data is recorded at set intervals of time. Its analysis can be used
to see how variables change over a period of time. And hence, can be used for
forecasting.
● For this project, the companies chosen were Bajaj Ltd. and Muthoot Finance under
the financial service sector. We used the data of revenue and expenses of both the
companies for the past ten years i.e., from 2013- 2022 and fitted in a trend line while
forecasting the variables for upcoming five years. In addition, We analyzed the
procured data and ended up interpreting the results.

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 APPENDIX:

Data Source:
1. https://www.moneycontrol.com/financials/bajajfinance/profit-
lossVI/BAF/1#BAF
2. https://www.moneycontrol.com/financials/muthootfinance/profit-
lossVI/MF10#MF10