Series 79 practice questionhardPrecedent Transactions - Stub Period Adjustments
When a precedent transaction closes mid-year and financials are reported on a calendar-year basis, how should LTM (last twelve months) financials be calculated for valuation purposes?
- APrior fiscal year plus current-year YTD results minus prior-year comparable YTD results✓ Correct answer
- BAnnualize the most recent quarter only
- CTake the last fiscal year's results
- DInterpolate using only cash flow statement items
Explanation
Why A — Prior fiscal year plus current-year YTD results minus prior-year comparable YTD results
LTM is constructed by summing the prior full year and YTD results for the current year, less the YTD prior year. Other methods do not accurately capture the last twelve months' performance.
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