MBA Prep CFIN || Questions and 100% Accurate Answers.

Analysts within a company are more likely to fall into the "false accuracy trap" when they develop pro formas than would external analysts because insiders have access to more detailed information correct answers True When making financial projections, if a particular expense item cannot be predicted with any degree of confidence, it should be forecast at the highest level it would ever likely to reach, so as to make the pro formas conservative correct answers False The greater detail in a pro forma, the greater its accuracy will be correct answers False The qualitative portion of a financial analysis is analogous to the hypothesis-forming state of scientific investigation because correct answers assumptions not tested till numbers are run, false assumption may be formed, empirical measurement performed later During the qualitative portion of developing pro formas, correct answers industry-wide considerations may be less important than company-specific issues An assumption is critical if correct answers it affections the bottom line greater than other assumptions, it reflects a judgement about the firm's ability to perform one of the keys to success Horizontal and vertical percentage trends are useful in projecting future financial statements correct answers True In a stable, predictable industry, an average of the precious ten years' sales growth figures probably provides a more accurate forecast than assuming the same level of sales next year as in the current year. correct answers True When performing sensitivity analysis correct answers statistical methods can be usefully employed, electronic spreadsheets can save time, assumptions should be changed one at a time The final step in using pro formas is to correct answers Compare the results of the sensitivity analysis to the decision-maker's tolerance in the current situation The most accurate pro formas contain the most detail correct answers false In projecting an income statement based on a balance sheet, which of the following categories would you contend to be least likely to vary directly with a change in sales? correct answers Depreciation Hypothesis that are formed during the qualitative analysis can be verified when the analyst reviews the firm's historical performance correct answers True