TABLE 16-13 A Local Store Developed a Multiplicative Time-Series Model to Forecast

question 14

Multiple Choice

TABLE 16-13
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 1998 to 2002. The following is the resulting regression equation:
log₁₀Y^{^} = 6.102 + 0.012 X - 0.129 Q₁ - 0.054 Q₂ + 0.098 Q₃
where
Y^{^} is the estimated number of contracts in a quarter
X is the coded quarterly value with X = 0 in the first quarter of 1998.
Q₁ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
Q₂ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
Q₃ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Table 16-13, the best interpretation of the coefficient of Q₃ (0.098) in the regression equation is

• A) the revenues in the third quarter of a year is approximately 25.31% higher than it would be during the fourth quarter.
• B) the revenues in the third quarter of a year is approximately 9.8% higher than the average over all 4 quarters.
• C) the revenues in the third quarter of a year is approximately 25.31% higher than the average over all 4 quarters.
• D) the revenues in the third quarter of a year is approximately 9.8% higher than it would be during the fourth quarter.

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Definitions:

Accounts Receivable Turnover

A financial metric that measures how effectively a company collects debts from its customers over a period, indicating the efficiency of credit policies and collection efforts.

Net Credit Sales

The net sales of a company, calculated by subtracting returns, discounts, and allowances for damaged or missing merchandise from the total sales.

Ending Balance

The difference between footings in a T account.

Asset Turnover Ratio

A ratio that indicates how efficiently a company uses its assets to generate sales and thus helps measure the overall efficiency of the company.