Question #15
Reading: Reading 14 Financial Statement Modeling
PDF File: Reading 14 Financial Statement Modeling.pdf
Page: 9
Status: Unattempted
Correct Answer: B
Question
Yolanda Resham is currently developing a forecast horizon for several companies that she covers in her role as an equity analyst. The equities under consideration are part of a portfolio with an average annual turnover of 25%. Which of the following statements is least accurate regarding the choice of time horizon?
Answer Choices:
A. Cyclicality should be considered when developing the timeframe
B. A time horizon of 4 years would be consistent with the portfolio turnover
C. The time horizon should be independent of the average holding period for a stock
Explanation
The holding period should be considered. An average annual turnover of 25% is consistent
with a holding period of 4 years (1/0.25).