CFAI 2024 EQ M7

Forecast objects should be:

• based on independent third-party reports

• 2. based on individual discrete items, not aggregations

• 2. disclosed regularly or based on items that are disclosed regularly

Management guidance is most appropriately used by analysts in forecasting

• 1. capital expenditures of a company

• 1. pricing of commodities sold by a company

• 1. revenue of a company sensitive to the business cycle

Which of the following is an example of a top-down driver of revenues for a passenger airline?

• 1. Market share of routes

• 1. Number of planes in fleet

• 1. Average ticket price per mile flown

A clothing company, which initially produced designer clothing, has increasingly entered into the mass market. Which of the following approaches to forecasting revenues is least appropriate?

• 1. Historical results

• 1. Analyst’s discretionary forecast

• 1. Historical base rates and convergence

"Forecast indirectly through drivers of financial statement lines" is statement of what forecast object?

• Drivers of financial statement lines

• Individual financial statement line

• Summary measures

• Ad hoc Objects

How many forecast approaches are there?

• 4

• 5

• 6

• 7

Choose the WRONG statement. The choice of the forecast time horizon is determined by?

• The investment strategy for which the security is being considered.

• The analyst’s employee’s preferences.

• Company-specific factors: long enough to allow the benefits of the changes to be measurable

Top-down industry analysis starts with expectations about:

• macro variables

• individual company

• reportable segments

Which statement is TRUE?

• Recurring items and effects should be excluded from a forecast object

  and considered separately

• Non-recurring items and effects should be included from a forecast object

  and considered separately

• Non-recurring items and effects should be excluded from a forecast object

  and do not need to consider

• Non-recurring items and effects should be excluded from a forecast object

  and considered separately

Which forecast approach is appropriate when other approaches are

inappropriate?

• Historical results

• Historical base rate and convergence

• Management guidance

• Analyst’s discretionary forecast