Series 79 practice questioneasyFinancial Modeling
A model assumes accounts receivable equal 8% of annual revenue. What modeling approach is that?
- AA discount rate assumption
- BA terminal value bridge
- CA purchase accounting adjustment
- DA driver-based working capital assumption tied to an operating metric✓ Correct answer
Explanation
Why D — A driver-based working capital assumption tied to an operating metric
A driver-based working capital assumption tied to an operating metric Driver-based models forecast balance sheet accounts using business ratios such as days sales outstanding or revenue percentages. That approach usually creates more realistic projections than hard-coding flat dollar amounts.
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