Question

A random sample of 64 accounts of a company shows the average days sales in receivables is 48 with standard deviation of 18 days. What is the p-value for the test of a hypothesis that the company's average days sales in receivables is 45 days or less? Use the normal approximation to calculate the p-value (the NORMSDIST() spreadsheet function will come in handy). Enter answer accurate to three decimal places.

Answer 1

Here, Average Days Sales in Receivables has an observed mean value of 48 days, standard deviation of 18 days and the hypothesis that the Average days sales receivable is 45 days or less (i.e. we have to find the Cumulative probability that the Average days sales receivable is 45 days or less)

In this case, the normalised Z value is

Z= (x- mean)/standard deviation

= (45-48)/18

= -0.16667

The p value corresponding to this Z value can be found out by using NORMSDIST function in Excel

which immediately returns the p value as 0.433816

Instead of Z value the X value of 45 , mean value of 48 and standard deviation value of 18 can also be used in

NORMDIST function in excel (put 1 for cumulative) to get the same answer

So, the p value is 0.433 (Accurate to 3 decimal places)