What Would Be the Appropriate Way to Forecast Sales for a Firm

question 40

Multiple Choice

What would be the appropriate way to forecast sales for a firm that has stable year-to-year sales,but seasonally fluctuating month-to-month sales?

• A)Forecasts would need to be adjusted for a trend, but would not need a regression to adjust for seasonality.
• B)Forecasts would need to be adjusted for seasonality, but would not need a regression to adjust for a trend.
• C)Ignore both the trend and the seasonality.
• D)None of these.

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Definitions:

CAPM

Short for Capital Asset Pricing Model, a financial model that describes the relationship between systematic risk and expected return for assets.

Required Rates of Return

The minimum annual percentage earnings needed from an investment to compensate for its risk, serving as a benchmark for evaluating potential investments.

Standard Deviations

A statistical measure of the dispersion or variability of a set of data points or investment returns from their average value.

Expected Return

The weighted average of the probable returns of an investment, calculated based on past performance or statistical analyses.