- The objective of forecasting is to develop:
a set of realistic expectations for future value-relevant payoffs.
- Financial statement forecasts rely on additivity within financial statements and articulation across financial statements. Given this information forecasts of future growth in inventory will most likely affect growth in:
accounts payable.
- When projecting operating expenses, it is important to determine the mix of fixed and variable costs; one clue suggesting the presence of fixed costs is:
the percentage change in cost of goods sold in prior years is significantly less than the percentage change in sales.
- Common-size financial statements recast each statement item as:
a percentage of some "base number" on the financial statement in question.
- All of the following are the fundamental bases for future payoffs to equity shareholders and share value except:
depreciation
- Projected financial statements can be used to assess the sensitivity of all of the following except:
unusual patterns for projected total assets.
- Financial statement forecasts are important analysis tools because forecasts of _____ play a central role in valuation and many other financial decision contexts.
Future Payoffs
- It may be difficult to forecast sales for firms with ____ patterns because their historical growth rates reflect wide variations in both direction and amount from year to year.
Cyclical sales
- The formula for forecasting inventory as a standalone item is
COGS/Inventory Turnover Ratio
- Expected future payoffs can be measured in terms of:
Dividends, CFs, and Earnings
