Financial Modeling and Forecasting 2

Question 1

Business Sales forecasting methods

Answer 1

1) Trend Analysis
2) Moving average
3) Exponential smoothing

Question 2

Probability analysis

Answer 2

Is used during capital budgeting risk analysis

Question 3

If Variable cost per unit decreases what happens to contribution margin, break even point and margin of safety

Answer 3

Contribution Margin - Increase

Break Even Point - Decrease

Margin of Safety - Increase

Question 4

Higher contribution margin

Answer 4

makes it easier to get to the break even point

Question 5

During Inflation

Answer 5

people and companies like to borrow money (repay with money that has less purchasing power)

Question 6

Deflation

Answer 6

Discourages borrowing

Question 7

High rates of inflation are associated with

Answer 7

economic contraction

redistribution of wealth

Question 8

What happens to total variable costs when production increases within the relevant range?

Answer 8

Total Variable costs increases

Question 9

what is the foundation for fair value modeling

Answer 9

objective data

Question 10

Greater subjectivity in the assumptions and a longer forecast period for expected future cash flows

Answer 10

can lead to more uncertain results in valuation models