Ch 8 and 9

Question 1

ASIDE FROM THE AVERAGE METHOD, __________________________
ARE BOTH PROVEN TO BE AN EFFECTIVE TOOL FOR FORECASTING, SPECIFICALLY
FOR SALES AND NET INCOME PROJECTION

THOUGH THE METHODS INCLUDE THE PRESENCE OF ASSUMPTION AS ANY
FORECASTING TOOL, AVERAGE, RATIO AND SENSITIVITY METHODS ARE THE
MOST BASIC TOOLS USED IN FINANCIAL MANAGEMent

Answer 1

RATIO METHOD AND SENSITIVITY METHOD

Question 2

*THIS METHOD IS BASED ON TIME SERIES WITH THE ASSUMPTION
THAT, WHAT HAPPEN IN THE IMMEDIATE PAST WILL CONTINUE TO
HAPPEN IN THE IMMEDIATE FUTURE
*THUS, THIS METHOD UTILIZE SALES OF THE CURRENT YEAR AND SALE
OF THE IMMEDIATE PREVIOUS YEAR

Answer 2

RAtio method

Question 3

ADVANTAGES OF RATIO METHOD:

Answer 3

*THE RATIO METHOD IS SIMPLE AS THE AVERAGE METHOD
*UTILIZE AT LEAST TWO CONSECUTIVE TERM
*EASY TO DETERMINE THE FORECASTED VALUE BASED ON THE
VALUE FROM THE PREVIOUS TERM
ADVANTAGES OF RATIO METHOD

Question 4

USEFUL TOOL TO PROJECT NET INCOME
IN A TIME SERIES SETTING, HOWEVER, WHEN EBIT IS NEGATIVE, THE
METHOD IS NOT USABLE

*REGARDLESS WHETHER THERE IS A HIGH NET INCOME OR LOW NET
INCOME, AS LONG AS THE RESULT IS POSITIVE, WE CAN USE THE
SENSITIVITY METHOD

Answer 4

Sensitivity method

Question 5

*THIS METHOD IS USING THE ASSUMPTION THAT FOR CONSECUTIVE
TERMS THAT ALL EXPENSES WILL INCREASE GRADUALLY WITHOUT
INCREASING THE SALES
*INCREASE IS BASED ON SPECIFIC INTEREST APPLICABLE FOR THE
SUBJECT INDUSTRY

Answer 5

Sensitivity method

Question 6

THE MAIN PURPOSE OF SENSITIVITY METHOD IS TO DETERMINE THE
_______________ OF THE BUSINESS OR PRODUCT IN THE
LONG RUN WITH THE PREMISE THAT EXPENSES ARE INCREASING
GRADUALLY

Answer 6

SURVIVAL/SUSTAINABILITY