16.1 Introduction

Multiple regression is a widely used tool in business and economic analysis, because it allows the exploration of complex relationships between variables. For example, multiple regression is used to do the following:

• explain the value of a business Y as a function of accounting data (assets, debt, sales, inventory turnover, risk, etc.)

• explain the demand for a product (Y) in terms of its price, advertising expenditure, income of purchaser, etc.

• explain the cost of a project (Y) from component costs of past projects