CFA Level I · CFA Level I Exam · Introduction to Financial Statement Modeling
An analyst forecasts industry sales of 50 billion next year and expects the company's market share to rise from 12% to 14%. Industry sales were 46 billion this year. Using a top-down approach, the forecast growth in the company's revenue is closest to:
Revenue growth is about 26.8%. Current revenue is 46 billion × 12% = 5.52 billion, and forecast revenue is 50 billion × 14% = 7.00 billion. The ratio 7.00/5.52 gives 26.8%, which combines industry growth of 8.7% with the market share gain.
- A8.7%
- B15.2%Correct
- C26.8%
Explanation
Current revenue = 46 × 0.12 = 5.52 billion. Forecast revenue = 50 × 0.14 = 7.00 billion. Growth = 7.00/5.52 − 1 = 26.8%. The 8.7% option is industry growth only, and 15.2% is not a correct calculation.
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