1Milestone 2
Introduction
This report provides an in-depth look at the impact of the COVID-19 pandemic on
corporate earnings, with a particular focus on companies in Australia and the United
Kingdom, using revenue and gross profit as specific measures of financial health.
Revenue represents the scale of business activities carried out by the company
(Endri et al. 2020; Lazaridis and Tryfonidis 2006). Gross profit is a direct reflection of
the financial position and is expressed as total revenue minus the cost of goods sold
(Manjunath et al. 2023; Paeleman et al. 2023). The results of the visual analysis show
that the financial health of Australian companies is slightly better than that of the UK,
but further statistical testing is needed. Therefore, this report uses a single-tail test to
explore whether there are significant differences between UK and Australian firms on
two measures of profitability, specifically whether Australia is significantly better than
the UK at the 1% and 5% significance levels (Bryan and Mason 2022; Kothari and
Warner 1997).
In the null assumptions, this report assumes that Australia's mean operating revenue
and gross profit are equal to that of the United Kingdom. The alternative hypotheses
suggest greater mean operating revenue and gross profit in Australia, a standpoint
substantiated by the calculated Z scores and corresponding p-values. Distilling
complex data into actionable insights, this report elucidates sector-specific impacts
and provides a granular view of the industry's financial health amidst crisis. A series
of tests render a nuanced portrait of resilience and vulnerability, with tables capturing
the statistical essence of the COVID effect on two sequential years, laying the
groundwork for strategic foresight and decision-making in a post-pandemic
economic landscape.
Data Analysis
Indicators of interest
In terms of two measures of profitability, this report shows:
Operating Revenue: Both countries show an overall increase in operating revenue,
indicating a recovery or growth phase, possibly recovering from the impact of
COVID-19.
Gross Profit: While there's an increase in gross profit, the standard deviation is
significantly high, suggesting a wide variance among companies. The presence of
negative values indicates losses for some companies, highlighting the varying impact
of economic conditions and potentially COVID-19 on different sectors.
Next,author make a bar chart to show the comparison between Australia and the UK
in terms of Operating Revenue and Gross Profit in 2019 (see Figure 1). The left side of
2figure 1 shows the 2019 Operating Revenue performance of the business allocated
to the United Kingdom and Australia, and the right side of Figure 1 shows its 2019
Gross Profit performance, with blue for Australia and orange for the UK. According to
Figure 1, there is a certain difference in average Operating Revenue and Gross Profit
between Australia and the United Kingdom in 2019. The average operating income in
Australia was around 160,000 units, while the average operating income in the UK
was slightly lower. In addition, the average gross profit in Australia is between 20,000
and 40,000 units, and the average gross profit in the United Kingdom is around
20,000 units.
Figure 1. Average Operating Revenue (Turnover) by Country - 2019
Hypothesis testing
Adoption of One-tailed Test
This report chose to use a unilateral test to examine the direction of the differences.
This is because both Operating Revenue and Gross Profit, on average, are higher in
Australia than in the UK. The selection of unilateral tests can not only show that the
two countries have a significant difference in the number of profitable indexes, but
also see which countries are assigned better.
Given the decision to use a one-tailed test due to the observed higher averages in
Australia compared to the UK, here is the hypotheses:
Hypothesis
Operating Revenue Hypotheses:
Null Hypothesis (H0): The mean operating revenue of wholesale distribution
companies in 2019 is equal to or less in Australia than in the UK.
Alternative Hypothesis (H1): The mean operating revenue of wholesale distribution
3companies in 2019 is greater in Australia than in the UK.
Gross Profit Hypotheses:
Null Hypothesis (H0): The mean gross profit of wholesale distribution companies in
2019 is equal to or less in Australia than in the UK.
Alternative Hypothesis (H1): The mean gross profit of wholesale distribution
companies in 2019 is greater in Australia than in the UK.
Results
The one-tailed tail test results show that:
Z Score: 0.1301
P Value: 0.4482
Gross Profit Analysis:
Z Score: 3.7764
P Value: 0.00007955
Analysis
Operating Revenue Analysis:
The p-value is 0.4482, so either at the 5% significance level or the 1% significance
level, author fail to reject the null hypothesis, that is, there is no significant difference
in operating revenue between the UK and Australia.
Gross Profit Analysis:
The p-value is 0.00007955. In terms of gross profit, as the null hypothesis can be
rejected at the 5% or 1% level of significance. This reflects the statistically significant
difference in gross profit between the UK and Australia, with Australia having a
significantly higher average gross profit than the UK.
In summary, there is no statistically significant difference between Australia and the
UK in terms of operating income at either level of significance. However, unlike
operating income, in terms of gross profit, there is a significant difference between
the two countries at both the 5% and 1% levels of significance, which may be due to
differences in cost or pricing strategies between Australia and the UK, and it is clear
that the difference in gross profit would not have been so significant had one of the
two not been significantly different between Australia and the UK.
Table 1. COVID Analysis of Operating Revenue in 2019
Industry Code Operating Revenue Test Result Reject/Not Reject p-value
5012 3.81 Reject 0.00
5013 -0.34 Not Reject 0.73
5032 -1.19 Not Reject 0.24
4Table 2. COVID Analysis of Operating Revenue in 2020
Industry Code Operating Revenue Test Result Reject/Not Reject p-value
5012 3.81 Reject 0.00
5013 -0.34 Not Reject 0.73
5032 -1.19 Not Reject 0.24
Table 3. COVID Analysis of Gross Profit in 2019
Industry Code Gross Profit Test Result Reject/Not Reject p-value
5012 2.24 Reject 0.03
5013 -0.24 Not Reject 0.81
5032 -2.84 Reject 0.01
Table 4. COVID Analysis of Gross Profit in 2020
Industry Code Gross Profit Test Result Reject/Not Reject p-value
5012 2.24 Reject 0.03
5013 -0.24 Not Reject 0.81
5032 -2.84 Reject 0.01
Conclusion
The following conclusions can be drawn from the analysis and results of the report:
In terms of operating income, Australia and the United Kingdom were in agreement
at either 5% or 1% at the significance level when COVID-19 came in 2019, and there
was no significant difference in operating incomeThis suggests that although the two
countries were hit by COVID-19 to varying degrees in 2019, there was no significant
difference in operating income, which may prove the resilience of operating revenue.
However, in terms of gross profit, the average gross profit of Australian companies is
higher than that of their UK counterparts, which rejects the null hypothesis at both
the 1% and 5% significance levels. This reflects the emphasis on the differential
impact of COVID-19 on the selected profitability indicators.
5Reference
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