CFA Level I · CFA Level I Exam · Company Analysis: Past, Present, and Future
An analyst is forecasting a retailer's revenue using a bottom-up approach. The analyst is most likely to project revenue as:
A bottom-up forecast builds revenue from company-level drivers, so store count multiplied by sales per store fits. Industry sales times market share and GDP-linked growth start from aggregate data and work down, which makes them top-down or macro-based approaches.
- Aindustry sales multiplied by a forecast market share
- Bthe prior year's revenue grown at nominal GDP growth
- Cnumber of stores multiplied by forecast sales per storeCorrect
Explanation
Bottom-up forecasts build from company-level or unit-level drivers, such as store count times sales per store. Using industry sales times market share is top-down, and GDP growth is a top-down macro-linked method.
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