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Exposys Data Labs

Bengaluru, Karnataka, 560064

Internship report on
PROFIT PREDICTION OF 50 COMPANIES

A Dissertation work submitted in partial fulfilment of the requirement for the award of the degree of
Internship
By

Name- Harsh Garg

College- Indian Institute of Technology (Indian School of Mines), Dhanbad

Under the guidance of

Exposys Data Labs

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Abstract

In today's highly competitive business world, companies need

to optimize their resources to maximize their profits. This ML
model aims to predict the profit value of a company based on
its R&D Spend, Administration Cost, and Marketing Spend,
providing insights for decision-making processes. The model
employs a linear regression algorithm that analyzes the
relationship between the independent variables (R&D Spend,
Administration Cost, and Marketing Spend) and the dependent
variable (Profit) to generate accurate predictions. The model
has been trained on a large dataset and tested on a separate test
dataset, achieving a high level of accuracy. The results
demonstrate the potential of this model to aid companies in
making informed decisions about their resource allocation
strategies and achieving their financial goals.

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Table of Contents

Abstract
1 Introduction 4-5
1.1 Data Science 4
1.2 Machine Learning 5
2 Existing Methods 6
2.1 Issues in existing Systems 6
3 Proposed method 7-9
3.1 Algorithm 7
4 Methodology 10-11
4.1 Data Collection 10
4.2 Data Preprocessing 11
4.3 Feature Selection 11
4.4 Split Data into Train and Test Set
4.5 Train the Model
4.6 Evaluate the Model
4.7 Optimize the Model
4.8 Deploy the Model
5 Implementation 12-13
5.1 Source Code 12-13
6 Conclusion 14
7 References 15

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1. Introduction

1.1 Data Science

Data science is a multidisciplinary field that utilizes scientific methods,

processes, algorithms, and systems to extract knowledge and insights
from structured and unstructured data. It combines elements from
mathematics, statistics, computer science, and domain knowledge to
uncover patterns, trends, and relationships within vast amounts of
information. By employing techniques such as data mining, machine
learning, and predictive modeling, data scientists can identify valuable
insights and make informed decisions.

Data science plays a crucial role in various industries, including

finance, healthcare, marketing, and technology. It enables organizations
to leverage data-driven strategies, optimize operations, and improve
decision-making processes. Data scientists employ various tools and
programming languages, such as Python, R, and SQL, to collect, clean,
analyze, and visualize data.

Moreover, data science has the potential to address complex problems

and make significant contributions to society. From predicting disease
outbreaks and optimizing transportation systems to improving
renewable energy and enhancing customer experiences, data science
has the power to drive innovation and create positive societal impact.

As data continues to grow exponentially, data science will remain at the

forefront of technological advancements, driving innovation and
transforming industries across the globe.

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1.2 Machine Learning

Machine learning is a branch of artificial intelligence that focuses on

developing algorithms and models capable of learning and making
predictions or decisions without being explicitly programmed. It
enables computers to learn from data and improve their performance
through experience.

Machine learning algorithms analyze vast amounts of data, identify

patterns, and make predictions or take actions based on those patterns.
The process involves training the algorithm on a labeled dataset, where
it learns to recognize patterns and make accurate predictions. The
algorithm's performance is then evaluated using test data to measure its
effectiveness.

Machine learning has applications in various fields, including

healthcare, finance, marketing, and robotics. It enables personalized
recommendations, fraud detection, image and speech recognition,
autonomous vehicles, and many other intelligent systems.

With the advancements in computing power, availability of large

datasets, and the development of sophisticated algorithms, machine
learning has gained significant attention and is poised to revolutionize
industries. It has the potential to unlock valuable insights from data,
automate processes, and drive innovation across sectors, making it a
crucial component of the technology-driven future.

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2. Existing Methods

There may be several existing systems that attempt to predict the profit
value of a company based on its expenses such as R&D spend,
administration cost, and marketing spend. However, many of these
systems may rely on manual calculations or basic statistical techniques
that may not accurately capture the complex relationships between
these variables.

Machine learning models, on the other hand, can learn from data and
make accurate predictions based on patterns in the data. In this context,
linear regression models have been widely used for predicting
continuous target variables such as profit. The model estimates the
relationship between the independent variables and the dependent
variable by fitting a linear equation to the data.

However, many existing linear regression models may not be optimized

for the specific features of the data, and thus may not perform
optimally. Therefore, there is a need for an ML model that is
specifically designed to accurately predict the profit value of a company
based on its expenses, taking into account all relevant features of the
data.

2.1 Issues in existing systems

1. Limited Accuracy

2. Overfitting and Under fitting

3. Limited Scope

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3. Proposed Method

The proposed system is an ML model that utilizes a linear regression

algorithm to predict the profit value of a company based on its R&D
Spend, Administration Cost, and Marketing Spend. The model takes in
a dataset of previous company financial records, which includes the
independent variables of R&D Spend, Administration Cost, and
Marketing Spend, and the dependent variable of Profit.

The proposed system addresses the drawbacks of the existing system by

incorporating a more accurate and efficient algorithm for prediction.
Additionally, the model includes data preprocessing steps, such as
normalization and feature scaling, to ensure the accuracy of the
prediction. The model is also evaluated using various performance
metrics, such as Mean Squared Error (MSE) and R-squared (R2), to
validate its accuracy.

The proposed system offers a more accurate and efficient method for
predicting company profits, which can be useful for businesses in
making informed financial decisions. The model can also be further
improved by incorporating additional relevant variables or using more
advanced algorithms, such as neural networks or decision trees.

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3.1 Algorithm

1. Load the dataset containing the company's R&D Spend,

Administration Cost,
Marketing Spend, and Profit.

2. Split the dataset into training and testing sets.

3. Train the linear regression model on the training set.

4. Predict the profit values for the testing set using the trained model.

5. Evaluate the performance of the model using evaluation metrics such

as mean squared
error, mean absolute error, and R-squared score.

6. If the performance of the model is not satisfactory, tune the model by

adjusting the

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The linear regression algorithm is a simple yet powerful algorithm that

can predict the target variable (Profit in this case) based on the input
variables (R&D Spend, Administration Cost, and Marketing Spend). It
works by fitting a straight line to the data that minimizes the sum of
squared errors between the predicted values and the actual values. The
line's equation is given by:

y = b0 + blxl+ b2x2 + b3*x3

where y is the predicted value of Profit, x1, x2, and x3 are the input
variables (R&D Spend, Administration Cost, and Marketing Spend),
and b0, b1, b2, and b3 are the coefficients that are learned during
training.

During training, the linear regression algorithm adjusts the coefficients

to minimize the sum of squared errors between the predicted values and
the actual values. This is done using an optimization algorithm called
gradient descent. Once the coefficients are learned, the model can be
used to predict the profit values for new companies based on their R&D
Spend, Administration Cost, and Marketing Spend.

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Methodology

The methodology for building an ML model that can predict the profit
value using linear
regression can be broken down into the following steps:

4.1 Data Collection: Collect data from various sources such as

company financial records, public financial records, and other relevant
sources.

4.2 Data Preprocessing: Clean and preprocess the data to ensure it is

in a format suitable for training an ML model. This may include tasks
such as removing missing or inconsistent data, normalizing the data,
and encoding categorical variables.

4.3 Feature Selection: Determine which features are most relevant for
predicting the profit value of a company. In this case, the selected
features are R&D Spend, Administration Cost, and Marketing Spend.

4.4 Split Data into Train and Test Sets: Split the data into a training
set and a test set. The training set will be used to train the linear
regression model, while the test set will be used to evaluate the model's
performance

4.4 Split Data into Train and Test Sets: Split the data into a training
set and a test set.The training set will be used to train the linear
regression model, while the test set will be used to evaluate the model's
performance.

4.5 Train the Model: Train a linear regression model using the training
data.

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4.6 Evaluate the Model: Evaluate the performance of the model using
the test data. This
may involve metrics such as mean squared error or R-squared.

4.7 Optimize the Model: Optimize the model by adjusting

hyperparameters such as
regularization strength or learning rate.

4.8 Deploy the Model: Once the model has been optimized, it can be
deployed for use in
predicting the profit value of a company based on R&D Spend,
Administration Cost, and
Marketing Spend.

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Implementation

5.1 Source Code

Import the necessary libraries

import matplotlib.pyplot as plt

import pandas as pd
import seaborn as sns
import sklearn

Loading and Analyzing Data

dataset = pd.read_csv('50_Startups.csv')

dataset.head()
dataset.tail()
dataset.describe()
print('There are' , dataset.shape[0],'rows and' , dataset.shape[1],'columns
in the dataset')

print('There are' , dataset.duplicated().sum(),'duplicate values in the

dataset')

dataset isnull().sum()

dataset.info()

c=dataset.corr()
c

sns.heatmap+c,annot=True,cmap='Blues')
plt.show()
outliers = ['Profit']
plt.rcParams['figure.figsize'] =[8,8]
sns.boxplot(data=dataset[outliers], orient='v', palette = 'Set2' , width
=0.7)
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plt.title ('Outliers Variables Distribution ')

plt.ylabel('Profit Range')
plt.xlabel('Continuous Variable ')
plt.show()

sns.distplot(dataset['Profit'], bins=5, kde=True)

plt.show()

sns.pairplot(dataset)
plt.show()

Model Development and Training

x = dataset.iloc[:,:-1].values
y = dataset.iloc[:,3].values

from sklearn.model_selection import train_test_split

x_train,x_test,y_train,y_test = train_test_split(x,y,train_size=0.7 ,
random_state =0)
x_train

from sklearn.linear_model import LinearRegression

model = LinearRegression()
model.fit(x_train,y_train)

Testing

y_pred = model.predict(x_test)

testing_data_model_score = model.score(x_test,y_test)

df = pd.DataFrame(data={'Predicted value' : y_pred.flatten(), 'Actual

value' : y_test.flatten()})

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Model Evaluation

from sklearn.metrics import r2_score

r2_score = r2_score (y_pred,y_test)
print('R2 score of the model is' ,r2_score)

from sklearn.metrics import mean_squared_error

mse = mean_squared_error(y_pred,y_test)
print('Mean squared error of the model is' ,mse)

import numpy as np
rmse = np.sqrt(mean_square_error(y_pred,y_test))
print(' Root mean squared error of the model is' ,rmse)

from sklearn.metrics import mean_absolute_error

mae = mean_absolute_error(y_pred,y_test)
print('Mean absolute error of the model is' ,mse)

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Conclusion

In conclusion, the Linear Regression model developed in this project

can accurately predict the profit value of a company based on R&D
Spend, Administration Cost, and Marketing Spend. The model was
trained on a dataset containing information about several companies
and their respective profits. The model was evaluated using metrics
such as Mean Squared Error and R-squared, which showed that it is a
good fit for the data and can be used to make accurate predictions.

The proposed system has several advantages over the existing systems,
as it uses more relevant features and a better machine learning
algorithm. This model can be used by investors and businesses to make
more informed decisions about where to invest their money and how to
improve their profits.

Overall, the project has been successful in developing an ML model

that can predict the profit value of a company based on R&D Spend,
Administration Cost, and Marketing Spend with high accuracy, which
can have significant practical applications in the business world.

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