Financial Risk Manager Part 1

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Quarter 1 sales for an automobile manufacturer were $180 million. If the quarter 1 seasonal index was 1.8, what is the estimate of annual sales for this firm?

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TTanishq

$400 million

$180 million

$720 million

$100 million

Explanation:

An index of 1.8 means that quarter 1 sales are 80% above the norm (average).
Thus, each quarter has average sales worth $\frac{\$ 180,000,000}{1.8} = $100,000,000 $. Therefore, the annual estimate = 4 * Quarter average = 4 * \$ 100,000,000 = $400,000,000.

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