Learning Module 7 Company Analysis: Forecasting

Which of the following is a recommended forecast object when preparing a financial model for a publicly listed retailer with regular quarterly disclosures?

An analyst is forecasting revenue for a mature retail company. Which forecast approach is most appropriate if the analyst expects no material changes in industry structure or the company's competitive position?

Which top-down revenue driver would an analyst use to estimate a retail company's sales if they plan to relate company growth to macro trends?

When forecasting revenue for a marketplace platform that reports GMV and separates retailer sales from third-party merchant sales, what must an analyst do to convert GMV into recognized revenue?

Which statement about non-recurring items in revenue forecasting is most accurate?

Which method is most commonly recommended to forecast maintenance capital expenditures?

When forecasting working capital using efficiency ratios, which of these formulations is correct for Days Inventory on Hand (DOH)?

An analyst forecasts revenue growth of 10 percent next year but input commodity prices are expected to rise 30 percent. If the company can pass through only 15 percent of the input increase to selling prices and expects volume to change, which forecast approach is most appropriate to forecast gross margin next year?

Which of the following is TRUE about using management guidance in forecasts?

When projecting SG&A expenses, which practice is recommended in the chapter?

An analyst uses DSO = 15 days, DOH = 70 days, and DPO = 120 days. If next-year revenues are forecast at 365,000 and COGS at 240,000, what is the projected accounts receivable balance (rounded)?

Which of the following best describes the difference between maintenance and growth CAPEX forecasts?

An analyst forecasts EBITDA of 200 million next year and management targets a gross-debt-to-EBITDA ratio of 2.0. What gross debt does this imply?

Which of the following signals suggests an analyst should use an analyst-discretionary forecast rather than a historical-results approach?

An analyst forecasts Iliso Marketplace's GMV growth by assuming national retail sales grow 3.4% and Iliso’s share of that market increases by 2 basis points. Which type of forecast object is being used?

Which of the following is a correct reason to forecast operating expenses on an aggregated basis rather than disaggregating every cost line?

If a company's inventory turnover is expected to increase because the product mix shifts toward perishable groceries, which working capital metric will most likely change and how?

In Example 2 (YY Ltd.), what is the correct method to compute accounts payable given DPO and COGS?

An analyst wants to estimate long-term maintenance CAPEX for a company with aging fixed assets. Which approach from the chapter is most sensible?

Which statement best captures the chapter's guidance on model complexity?

In the Iliso Marketplace case, third-party merchant take rate is 15 percent. If third-party GMV is forecast at 2,500 million, how much revenue will Iliso recognize from third-party fees?

Which approach to forecasting is least appropriate for a company in a fast-changing technological industry with few comparable peers?

What is the main advantage of using efficiency ratios (DSO, DOH, DPO) in working capital forecasting?

An analyst expects a company's DSO to fall from 45 days to 30 days as it improves collections. How will this affect accounts receivable if next year's revenue is forecast at 365 million?

Which of the following is the best approach to model SG&A for a five-year horizon when detailed segment cost data are not available?

An analyst uses depreciation to estimate maintenance CAPEX. Which caveat from the chapter should the analyst remember?

Which scenario analysis practice does the chapter recommend when uncertainty is high?

In the tablet vs PC cannibalization example, which key concept is used to estimate the impact on PC shipments?

Which of the following is a primary reason analysts split CAPEX into maintenance and growth when forecasting?

If an analyst's revenue forecast grows faster in higher-margin segments than in lower-margin segments, what is the expected effect on overall operating margin?

Which forecasting object is least appropriate for an analyst valuing a bank?

When might an analyst choose to forecast net working capital as a percent of sales rather than by efficiency ratios?

Which of these statements about using industry base rates and convergence in forecasts is consistent with the chapter?

An analyst wants to test how a 2 percent reduction in gross margin impacts operating income over a three-year forecast. According to the chapter, what is a suitable approach?

If management suspends guidance during high uncertainty, which forecasting approach does the chapter recommend using instead?

When estimating revenue for a retailer, which bottom-up driver is most appropriate if the retailer discloses same-store (comps) sales?

Which element makes working capital forecasts particularly uncertain for industries dominated by small private firms, according to the chapter?

Which of the following is true about forecasting gross margin for an airline facing volatile jet fuel costs with no hedging program?

If a company is transitioning from rapid growth to mature growth, which forecasting model for dividends does the chapter find most appropriate?

Which of these is an advantage of using FCFE (free cash flow to equity) over DDM (dividend discount model) for valuation?

In preparing a forecast for Warehouse Club Inc., the analyst finds the company’s SG&A as percent of sales is materially lower than the industry average because of its cost-leadership model. According to the chapter, what is the analyst’s best action?

Which of the following describes a valid use of management guidance in forecasting CAPEX?

According to the chapter, what is the recommended treatment of non-cash stock-based compensation in cash-flow based forecasts?

Which of the following is the chapter's recommended first step when a major competitor announces a large acquisition likely to alter market shares?

Which datapoint is most useful to calibrate a forecast of a company's maintenance CAPEX in absence of explicit disclosures?

How should an analyst treat a large, clearly-identified one-time legal settlement in the income statement when building forward operating forecasts?

Which of the following is TRUE regarding the selection of forecast horizon?

Which of these is an example of a capacity-based bottom-up revenue driver?

An analyst is forecasting a multi-year restoration of profitability after a structural downturn. Which forecast approach combination does the chapter suggest is likely to be most useful?

Which of the following best describes the chapter's recommendation about documenting assumptions in forecasts?