Financial modeling

Question 1

Which 3 basic forecasting techniques do we have?

Answer 1

1. Forecasting directly dollar amounts
2. Forecasting indirectly based on a driver
3. Control account (B/S items only)
   - -> EOP balance_t=BOP balance_t+increases_t-decreases_t

Question 2

How can the computer industry and other mature industries be characterized?

Answer 2

They mainly grow by acquiring market shares from their competitors.

The level of innovation/ new products that is possible, is so low that the growth opportunities shrink to nearly zero. These industries are also characterized by a few, big competitors in the market.

Question 3

Which of the following describe the ‘top-down’ forecast approach?

a) Estimate the whole industry
b) Break down business units (product classes, regions, sales channels)
c) Estimate the total revenues
d) Estimate the company’s market share

Answer 3

a) and d)

Question 4

Which of the following describe the ‘bottom-up’ forecast approach?

a) Estimate the whole industry
b) Break down business units (product classes, regions, sales channels)
c) Estimate the total revenues
d) Estimate the company’s market share

Answer 4

b)

Question 5

What does declining DSO and days inventories or longer DPO imply?

a) Higher bargaining power for the company and more financial needs
b) Lower bargaining power for the company and more financial needs
c) Lower bargaining power for the company and lower financial needs
d) Higher bargaining power for the company and lower financial needs

Answer 5

d) Higher bargaining power for the company and lower financial needs