A Perfect Forecasting Ability Implies That

question 2

Multiple Choice

A perfect forecasting ability implies that:

• A) the predicted change in earnings are higher than the realized change in earnings.
• B) the forecaster outperforms the naive no-change model.
• C) the value of Thiel's inequality coefficient will be more than 1.
• D) the predicted change in earnings equals difference between actual earnings and forecasted level of earnings.

---

Definitions:

Credit Balance

The amount of money that a company or individual has in their account, reflecting credits that exceed debits.

Salary Expense

This is the total amount paid to employees for services rendered during a specific period, typically reflecting wages or salaries before deductions.

Normal Credit Balance

The typical balance on the credit side of an account, as is the case for liabilities, equity, and revenue accounts.

Liabilities

Financial obligations or debts a company owes to others, which must be settled in the future by transfer of assets, provision of services, or other forms of economic benefit.