Question 17.30

17.30 Active retail companies versus failed companies.

Case 7.2 (page 389) compared the cash flow of 74 active retail firms with the cash flow for 27 firms that failed. Here we analyze the same data with a logistic regression. The outcome is whether or not the firm is active, and the explanatory variable is the cash flow. Here is the output from Minitab:

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  1. Give the fitted equation for the log odds that a firm will be active.
  2. Describe the results of the significance test for the coefficient of cash flow.
  3. The odds ratio is the estimated amount that the odds of being active would increase when the cash flow is increased by one unit. Report this odds ratio with the 95% confidence interval.
  4. Write a short summary of this analysis and compare it with the analysis of these data that we performed in Chapter 7. Which approach do you prefer?