Y X X X X X X 0 1 1 2 2 3 3 4 4 5 5 6 6
(5)
Where:
Y – Return on Assets
X1 – Cost of Sales to Sales Ratio
X2 – Debt Ratio
X3 – Days Sales Outstanding
X4 – Days Inventories Outstanding
X5 – Days Payables Outstanding
X6 – Cash Conversion Cycle
The error term ε represents the collective unobservable
influence of any omitted variables. In a linear regression each
of the terms being added involves unknown parameters, α0, α1,
. . . α6, which are estimated by ―fitting‖ the equation to the data
using method of least-squares. The value of p