Question: a) Calculate the normalized value of Return on equity for company A, to two decimal places B) Calculate the normalized value of Return on equity

You have been asked to perform a cluster analysis of firms in

 



a) Calculate the normalized value of Return on equity for company A, to two decimal places 

B) Calculate the normalized value of Return on equity for company B, to two decimal places. 

c) To calculate the Euclidean distance measure for these two companies, should you use the original data (given in the first table) or the normalized data? Justify your answer

You have been asked to perform a cluster analysis of firms in a particular industry. Data for two of the companies to be used in the analysis is provided below: Company A B Company A B 00 Total assets ($ millions) 100.0 120.0 Normalized values of two of the variables are given below: Total assets (Normalized) -1.00 Sales ($ millions) 1.00 130.0 90.0 0.20 Return on equity (%) -0.50 17.3 Sales (Normalized) 5.9 The industry mean and standard deviation of the Return on equity variable are 15% and 10% respectively.

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