Financial Risk Manager Part 1

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?

TTanishq

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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