Select Page

Inventory – Introduction

Before we begin, let’s review the various types of inventory and the inventory equation. For a merchandising firm, the inventory is usually the finished goods which they store for sale. For manufacturing units, the inventory will be in the form of raw material,...

Inventory Analysis

In this lesson, we will discuss the various methods for valuing inventory, namely, LIFO, FIFO and weighted average cost method. The measurement of inventory cost is important because it is one of the largest current assets in most firms and is also a crucial factor...

Decision Rule in Hypothesis Testing

A decision rule is the rule based on which the null hypothesis is rejected or not rejected. We first state the hypothesis. Then we determine if it is a one-tailed or a two tailed test. We then specify a significance level, and calculate the test statistic. Now we...

Test Statistic, Type I and type II Errors, and Significance Level

Test Statistic A test statistic is a quantity, calculated based on a sample, whose value is the basis for deciding whether or not to reject the null hypothesis. In our example, the sample statistic is the mean. Therefore, the test statistic will be: Type I and Type II...

One-tailed and Two-tailed Hypothesis Tests

A hypothesis test can be a one-tailed or a two-tailed test. A one-tailed test means that the hypothesis is one-sided such as the second and third formulation above. The second formulation tests whether the population parameter is less than a certain value (one-sided)....

Null and Alternative Hypothesis

When we form a hypothesis to be tested, the hypothesis is called a null hypothesis. The null hypothesis is written as H0. A null hypothesis will be a simple statement about the population parameter. For example, the hypothesis that the mean returns of a mutual fund...

Steps in Hypothesis Testing

The hypothesis testing process consists of the following steps: Stating the hypothesis. Identifying the appropriate test statistic and its probability distribution. Specifying the significance level. Stating the decision rule. Collecting the data and calculating the...

What is a Hypothesis

Many a times, we want to test the validity of a statement. Consider the following question: Is the mean return from this mutual fund more than the mean return from the benchmark? While answering such a question, our interest is not to find the actual mean returns of...