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CFA Level 2
Quantitative Methods

Predicted Sales with Seasonality Factor

Medium Time-series Analysis Seasonality

A financial analyst is examining the quarterly sales data of a retail company over a three-year period to identify patterns in the data. The sales are inherently subjected to seasonality due to seasonal holidays and weather conditions that affect consumer behavior. For this analysis, the analyst employs a time-series decomposition method.

After decomposing the time series, the analyst notes that the multiplicative seasonality factor for Q4 is 1.2, which indicates that the sales in Q4 tend to be 20% higher than the trend line. The trend values are calculated, and the analyst predicts Q4 sales for the next year by using the formula:

$$ ext{Predicted Q4 Sales} = ext{Trend Q4 Value} imes ext{Seasonality Factor} $$

If the calculated trend value for Q4 next year is $200,000, what are the predicted Q4 sales?

Hint

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