A) The quality of the financial statement forecasts will depend on the quality of the forecast assumptions.
B) The quantities forecasted within financial statement forecasts will depend on the quantity of the forecast assumptions.
C) Analysts should justify and evaluate the most important assumptions that reflect the critical risk and success factors of the firm's strategy.
D) Analysts can impose reality checks on the assumptions by analyzing the forecasted financial statements using ratios, common-size, and rate-of-change financial statements.
F) B) and C)
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Correct Answer
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A) Ratios cannot confirm whether forecast assumptions will turn out to be correct.
B) Ratios can tell whether future sales growth was accurately captured.
C) Ratios cannot tell whether assumptions about future cash flows are realistic.
D) Ratios can tell whether growth rates for sales are consistent with past sales growth performance.
F) A) and D)
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Correct Answer
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