Quarterly Sales of a Department Store for the Last Seven

question 37

Short Answer

Quarterly sales of a department store for the last seven years are given in the following table. The scatterplot shows that the quarterly sales have an increasing trend and seasonality. A linear regression model given by Sales = β₀ + β₁Qtr1 + β₂Qtr2 + β₃Qtr3 + β₄t + ε, where t is the time period (t = 1, ..., 28) and Qtr1, Qtr2, and Qtr3 are quarter dummies, is estimated and then used to make forecasts. For the regression model, the following partial output is available. Using the regression equation for the linear trend model with seasonal dummy variables, what is the sales forecast for the first quarter of Year 8?

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Definitions:

Basic Earning Power Ratio

A financial ratio that shows how effectively assets are being used to generate earnings before the influence of taxes and financing costs.

Times-Interest-Earned Ratio

A measure of a company's ability to honor its debt payments, calculated by dividing earnings before interest and taxes (EBIT) by interest expenses.

Equity Multiplier

A ratio of financial leverage that calculates the proportion of a company's assets funded by its shareholders' equity.

Total Assets Turnover Ratio

Measures the turnover of all the firm’s assets; it is calculated by dividing sales by total assets.