Chapter 6 Flashcards
Which of the following items are required to produce a forecasted future condensed income statement?
A. Tax rate; NOPAT margin; revenue growth; interest rate on ending debt
B. Tax rate; asset turnover; NOPAT margin; revenue growth
C. NOPAT margin; revenue growth; return on beginning investment assets; interest rate on beginning debt; leverage ratio
D. Tax rate; NOPAT margin; revenue growth; return on beginning investment assets; interest rate on beginning debt
D. Tax rate; NOPAT margin; revenue growth; return on beginning investment assets; interest rate on beginning debt
Consider the following statement: “Revenue growth tends to revert faster to its economy-wide average than operating asset turnover.” This statement is
A. True
B. False
A. True
Consider the following statement: “Return on net operating assets tends to revert faster to its economy-wide average than financial leverage.” This statement is
A. True
B. False
A. True
Consider the following statement: “Financial leverage tends to revert faster to its economy-wide average than financial spread.” This statement is
A. True
B. False
B. False
In cyclical industries, revenue growth
A. Tends to move in line with economy-wide growth
B. Tends to approach zero
C. Tends to be negative during economic upturns
D. Consistently exceeds economy-wide growth
A. Tends to move in line with economy-wide growth
Company A reports the following series of quarterly earnings: Q1 = 0.250; Q2 = 0.300; Q3 = 0.280; Q4 = 0.270; Q5 = 0.250; Q6 = 0.320; Q7 = 0.290; Q8 = 0.285. An analyst assumes that company A’s quarterly earnings perfectly follow the time-series process described by the Foster model. Under this assumption, the analyst’s forecast of quarter 9 earnings is
A. 0.2550
B. 0.2425
C. 0.2750
D. 0.2625
D. 0.2625
Consider the following statement: “The Foster model does not take into account that quarterly earnings may exhibit a seasonal pattern.” This statement is
A. True
B. False
B. False
