Skip to content

CFA Level I · CFA Level I Exam · Introduction to Financial Statement Modeling

A restaurant chain has 200 outlets at the start of the year and plans to open 20 outlets, spread evenly through the year, so that the average number open is 210. Average revenue per outlet is expected to be $2.5 million. Forecast revenue under a bottom-up approach using average outlets is closest to:

Forecast revenue is about $525 million. A bottom-up forecast multiplies the average number of outlets open during the year, 210, by expected revenue per outlet of $2.5 million. Using only opening or year-end outlet counts would misstate revenue.

  1. A$500 million
  2. B$525 millionCorrect
  3. C$550 million

Explanation

Bottom-up revenue = average outlets × revenue per outlet = 210 × $2.5 million = $525 million. Using 200 outlets gives $500 million, which ignores the new openings. Using 220 outlets gives $550 million, which wrongly assumes all new outlets operate the full year.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Financial Statement Modeling shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Financial Statement ModelingFree diagnostic mock

More Introduction to Financial Statement Modeling questions