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    PracticeACCAACCA MA — Management Accounting Practice Exam 4Question 08
    Easy2 marksMultiple Choice
    Data Analysis and Statistical TechniquesSyllabus BCorrelationData Analysis

    ACCA · Question 08 · Data Analysis and Statistical Techniques

    A tech company calculates the correlation coefficient (r) between its monthly marketing spend and its monthly software subscriptions to be +0.85.

    Which of the following statements is the most accurate interpretation of this result?

    Answer options:

    A.

    Marketing spend causes 85% of the increase in software subscriptions.

    B.

    There is a strong positive linear relationship between marketing spend and software subscriptions.

    C.

    72.25% of software subscriptions are generated by marketing spend.

    D.

    There is a weak positive linear relationship between the two variables.

    How to approach this question

    Evaluate the value of r. Values close to +1 indicate a strong positive linear relationship. Remember that correlation does not equal causation.

    Full Answer

    B.There is a strong positive linear relationship between marketing spend and software subscriptions.✓ Correct
    The correlation coefficient (r) measures the strength and direction of a linear relationship. A value of +0.85 is close to +1, indicating a strong positive linear relationship. It does not prove causation.

    Common mistakes

    Assuming correlation implies causation, or confusing r with r-squared.
    Question 07All questionsQuestion 09

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