BIWS Advanced Modeling Quiz Questions
Question: 26 **You're reviewing a set of annual 3-statement model projections for a company over the next 5 years. Your Managing Director looks at the projections and asks you to create a set of quarterly projections instead, so that he can share more granular data with a potential buyer. **
Which of the following answer choices represent CORRECT steps in this process of converting annual projections into quarterly projections? Answer Choices: 1) Allocate a percentage of annual revenue and expenses to each quarter based on historical trends (e.g. 20% of revenue in Q1 - 25% in Q2 - 30% in Q3 - and 25% in Q4). 2) Assume Year-over-Year (YoY) growth rates for revenue and expenses in each quarter and then at the end make sure total revenue and expenses equal the annual numbers. 3) Calculate the key drivers for Balance Sheet line items such as Days Sales Outstanding on a quarterly basis and apply those drivers to calculate the quarterly versions of all the figures in future periods. 4) Estimate future interest rates on a quarterly basis and use those to project the interest income / (expense) in each future quarter. 5) Assume an even split of certain Cash Flow Statement items, such as CapEx and Dividends Issued in each quarter (e.g. divide the annual number by 4). 6) Calculate Quarter-in-Current-Year-over-Quarter-in-Previous-Year revenue growth rates for the historical periods simply for informational purposes. 7) Allocate non-cash expenses such as Amortization of Intangibles and Stock-Based Compensation based on the historical percentage in each quarter.
