CFA Level I · CFA Level I Exam · Introduction to Financial Statement Modeling
An analyst forecasts a retailer's income statement using a top-down approach. Which forecast is the analyst most likely to start with?
A top-down forecast begins with the broad economy or industry, such as industry sales growth, and then applies an expected market share to reach company revenue. Store-level sales and product unit costs are bottom-up inputs that build up from company detail.
- AStore-level sales per square meter for each store
- BGrowth in the overall economy and industry sales, then the company's market shareCorrect
- CUnit costs of each product sold in the largest region
Explanation
A top-down approach starts with macroeconomic or industry-level forecasts and narrows to the company through market share. The other options describe bottom-up, company-specific detail.
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