To Estimate the Mean Earnings Forecast for a Large Company

question 114

Short Answer

To estimate the mean earnings forecast for a large company, an investor looked up earnings forecasts from six financial analysts. The six forecasts he found were 200, 220, 300, 185, 210, and 210 (in millions). Suppose the investor knows the population standard deviation is 25 million. Calculate a 95% confidence interval of the population mean earnings forecast.

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Definitions:

Income Summary

An account in which the revenues and expenses are summarized during the closing process, used to transfer net income or loss to owner's equity.

Net Income

The net income a company earns once all costs and taxes are deducted from its total revenues.

Rent Expense

Costs incurred from leasing property or equipment for business operations.

Worksheet

A financial document used by accountants to prepare adjusting entries and end-of-period financial statements.