Question

An automotive parts company that sells to automotive manufacturers is forecasting revenue as part of its internal budgeting and planning process. Which of the following is LEAST likely to be important in its forecasting assumptions?

a. Expected number of customers
b. Customer acquisition and retention rates
c. Profitability of customer orders
d. Level of long-term debt

Answer 1

The correct answer is letter "D": Level of long-term debt.

Step-by-step explanation:

There are four (4) methods companies use to estimate revenues which are the Straight-Line Method (based on constant growth rate), Moving Average (based on repeated forecasts), Simple Linear Regression (compares one independent with one dependent variable), and the Multiple Linear Regression (compares independent and dependent variables).

Long-term debt is not used at the moment of forecasting sales since the studies are focused on past acquisition trends based on the company's operations rather than the on debt firms incur to finance their activities. In other words, the amount of debt a company has does not determine the number of sales.

Answer 2

(D). Level of long-term debt

Step-by-step explanation:

When forecasting future sale and revenue at a certain period, a company has to consider certain important factors which include; the number of customers it expects to have at that period in future, the rate at which it acquires and retains customers and the profitability of orders it gets from its customers.

The level of long term debt the company has incurred does not affect future sales it expects to make.