1. Padere's preliminary assumptions in her income statement is that there will be an overall increase in expenses next year. What is the next logical step for Padere before presenting to her COO?

Select an answer:

• Each of the forecasting assumptions must be researched, supported, justified, and explained.

• No new steps are needed since the expected level of depreciation expense is tied to the expected level of property, plant, and equipment.

• Verify the forecasted increase in gross profit percentage is not impacted by changes in the competitive environment.

• No new steps are needed since the expected level of interest expense is tied to the expected level of loans.

2.

The most important and recommended starting point of any financial model exercise is the _____.

Select an answer:

• sales forecast

• cost of sales

• levels of inventory

• depreciation expenses

3.

Company A is significantly above the average value compared to other companies in the industry. You predict that next year the company will likely deliver to a number closer to the other companies. This is known as _____.

Select an answer:

• deviate from the mean

• net income percentage

• gross profit percentage

• reversion to the mean

4.

In a forecasted income statement, the amount of a company's _____ is determined by how much property, plant, and equipment the company has.

Select an answer:

• inventory

• depreciation expense

• assets

• accounts receivable

5.

As an investor, you look to the DCF (Discounted Cash Flows) of a company before deciding to invest. Which question would lead you to use a higher interest rate in your analysis?

Select an answer:

• How large will the future cash flows be?

• How risky are the cash flows?

• When will these cash flows occur?