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:

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

General Ledger Account

A comprehensive set of accounts that provides a complete record of all financial transactions of a company.

Allowance Method

An accounting technique used to estimate and account for potential uncollectable debts or credit sales.

Uncollectible Receivables

Debts owed to a company that are considered unlikely to be paid by the debtor, often written off as bad debts.