Jason wishes to establish the possible drivers of a company's percentage return on capital (ROC). He identifies performance measures such as the profit margin (%), sales, and debt ratio as possible drivers of ROC. He obtains the following results from the regression of ROC on profit margin (%), sales, and debt ratio.

Which independent variable(s) is (are) most likely statistically and significantly different from zero at the 5% significance level, assuming the sample size is 25?

A. Profit margin.
B. Sales and profit margin.
C. Sales and debt ratio.

Correct Answer: A

An independent variable is statistically significant if its p-value is less than the significance level, in this case, 5% or 0.05. Therefore, only the profit margin is statistically and significantly different from zero at the 5% significance level.

B and C are incorrect. At a 5% significance level, only the profit margin is statistically significantly different from zero.