CFA Level I · CFA Level I Exam · Financial Statement Forecasting in Equity Valuation
A company has forecast 2025 sales of €800 million. Based on historical relationships, the analyst expects days sales outstanding of 45 days, using a 365-day year. Forecast year-end accounts receivable are closest to:
Forecast receivables equal sales times days sales outstanding divided by 365: 800 million x 45 / 365, which is about €98.6 million. The other values come from using the wrong number of collection days.
- A€76.0 million
- B€98.6 millionCorrect
- C€123.3 million
Explanation
Receivables = sales x DSO / 365 = 800 x 45 / 365 = €98.63 million. Using 365/45 as a multiplier mistakenly gives about €6.5 billion, and using 365 days divided by turnover incorrectly yields other values; €76.0 million results from using 35 days, and €123.3 million from 56 days.
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