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

Compared with a top-down revenue forecast, a bottom-up forecast for a company with many distinct products is most likely to:

A bottom-up forecast most likely captures product-level drivers such as volume and price more directly. It builds total revenue from individual products, stores or segments, whereas a top-down forecast starts from GDP and industry totals and applies a market share assumption.

  1. Arely mainly on GDP growth and industry share assumptions
  2. Bcapture product-level drivers such as volume and price more directlyCorrect
  3. Cavoid the need for any assumptions about individual product demand

Explanation

Bottom-up forecasts build revenue from company-level drivers such as units sold and price per product, so they reflect product detail directly. Reliance on GDP and industry share describes top-down. Bottom-up methods still require demand assumptions for each product.

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