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Business Forecasting with Business forecastX 6th Edition Test Bank

Improve your exam results with Business Forecasting with Business forecastX 6th Edition Test Bank, which includes a variety of MCQs and detailed answers to guide you.

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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 1 preview image1Chapter 1MULTIPLE CHOICE TEST BANKNote: The correct answer is denoted by **.1.Which of the following doesnotrequire sophisticated quantitative forecasts?A)Accounting revenue forecasts for tax purposes.B)Money managers use of interest rate forecasts for asset allocation decisions.C)Managers of power plants using weather forecasts in forecasting power demand.D)State highway planners require peak load forecasts for planning purposes.E)All the above require quantitative forecasts.**2.Under what circumstances may it make sensenotto prepare a business forecast?A)No data is readily available.B)The future will be no different from the past. **C)The forecast horizon is 40 years.D)There is no consensus among informed individuals.E)The industry to forecast is undergoing dramatic change.3.What is most likely to be the major difference between forecasting sales of a privatebusiness versus forecasting the demand of a public good supplied by a governmental agency?A)Amount of data available.B)Underlying economic relationships.C)Lack of market-determined price data for public goods. **D)Last of historical data.E)Lack of quantitative ability by government forecasters.4.Which of the following points about supply chain management isincorrect?A)Forecasts are required at each step in the supply chain.B)Forecasts of sales are required for partners in the supply chain.C)Collaborative forecasting systems across the supply chain are needed.D)If you get the forecast right, you have the potential to get everything else right inthe supply chain.E)None of the above. **5.Which of the following isnottypically part of the traditional forecasting textbook?A)Classical statistics applied to business forecasting.B)Use of computationally intensive forecastingsoftware. **C)Attention to simplifying assumptions about the data.D)Discussion of probability distributions.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 2 preview image
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 3 preview image2E)Attention to statistical inference.6.Which subjective forecasting method depends upon the anonymous opinion of a panel ofindividuals to generate sales forecasts?A)Sales Force Composites.B)Customer Surveys.C)Jury of Executive Opinion.D)Delphi Method. **E)None of the above.7.Which subjective sales forecasting method may have the most information about thespending plans of customers for a specific firm?A)Sales Force Composites. **B)Index of consumer sentiment.C)Jury of Executive Opinion.D)Delphi Method.E)None of the above.8.Which subjective sales forecasting technique may have problems with individuals whohave a dominant personality?A)Sales Force Composites.B)Customer Surveys.C)Jury of Executive Opinion. **D)Delphi Method.E)None of the above.9.Which of the following methods isnotuseful for forecasting sales of a new product?A)Time series techniques requiring lots of historical data. **B)Delphi Method.C)Consumer Surveys.D)Test market results.E)All the above are correct.10.Which of the following is not considered a subjective forecasting method?A)Sales force composites.B)Naive methods. **C)Delphi methods.D)Juries of executive opinion.E)Consumer surveys.11.Which of the following isnotan argument for the use of subjective forecasting models?
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 4 preview image3A)They are easy for management to understand.B)They are quite useful for long-range forecasts.C)They provide valuable information that may not be present in quantitative models.D)They are useful when data for using quantitative models is extremely limited.E)None of the above. **12.Forecasts based solely on the most recent observation(s) of the variable of interestA)are called “naive” forecasts.B)are the simplest of all quantitative forecasting methods.C)leads to loss of one data point in the forecast series relative to the original series.D)are consistent with the “random walk” hypothesis in finance, which states that theoptimal forecast of today's stock rate of return is yesterday's actual rate of return.E)All the above. **13.You are given a time series of sales data with 10 observations. You construct forecastsaccording to last period’s actual level of sales plus the most recent observed change in sales.How many data points will be lost in the forecast process relative to the original data series?A)One.B)Two. **C)Three.D)Zero.E)None of the above.14.Suppose you are attempting to forecast a variable that is independent over time such asstock rates of return. A potential candidate-forecasting model isA)The Jury of Executive Opinion.B)Last period’s actual rate of return. **C)The Delphi Method.D)Last period’s actual rate of return plus some proportion of the most recentlyobserved rate of change in the series.E)None of the above.15.Measures of forecast accuracy based upon a quadratic error cost function, notably rootmean square error (RMSE), tend to treatA)levels of large and small forecast errors equally.B)large and small forecast errors equally on the margin.C)large and small forecast errors unequally on the margin. **D)every forecast error with the same penalty.E)None of the above.16.Which of the following isincorrect? Evaluation of forecast accuracy
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 5 preview image4A)is important since the production of forecasts is costly to the firm.B)requires the use of symmetric error cost functions.C)is important since it may reduce business losses from inaccurate forecasts.D)is done by averaging forecast errors.E)both b) and d) are incorrect. **F)both a) and b) are incorrect.17.Which of the following measures of forecast accuracy can be used to compare “goodnessof fit” across different sized variables?A)Mean Absolute Error.B)Mean Absolute Percentage Error. **C)Mean Squared Error.D)Root Mean Squared Error.E)None of the above.18.Which of the following measures is a poor indicator of forecast accuracy, but useful indetermining the direction of bias in a forecasting model?A)Mean Absolute Percentage Error.B)Mean Percentage Error. **C)Mean Squared Error.D)Root Mean Squared Error.E)None of the above.19.Which measure of forecast accuracy is analogous to standard deviation?A)Mean Absolute Error.B)Mean Absolute Percentage Error.C)Mean Squared Error.D)Root Mean Squared Error. **.20.Which of the following measures of forecast performance are used to compare models fora given data series?A)Mean Error.B)Mean Absolute Error.C)Mean Squared Error.D)Root Mean Squared Error.E)All of the above. **21.What values of Theil’s U statistic are indicative of an improvement in forecast accuracyrelative to the no-change naive model?A)U < 0.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 6 preview image5B)U = 0.C)U < 1. **D)U > 1.E)None of the above.22.RMSE applied to the analysis of model forecast errors, treatsA)levels of large and small forecast errors equally.B)large and small forecast errors equally on the margin.C)large and small forecast errors unequally on the margin. **D)every forecast error with the same penalty.23.Because of different units of various data series, which accuracy statistic can be usedacross different series?A)MSE.B)RMSE.C)MAPE. **D)MAEE)None of the above.24.Some helpful hints on judging forecast accuracy include:A)Be wary when the forecast outcome is not independent of the forecaster.B)Do not judge model adequacy based on large one-time errors.C)Do not placed unwarranted faith in computer-based forecasts.D)Keep in mind what exactly you are trying to forecast.E)All of the above. **25.Which of the following isnotan appropriate use of forecast errors to access the accuracyof a particular forecasting model?A)Examine a time series plot of the errors and look for a random pattern.B)Examine the average absolute value of the errors.C)Examine the average squared value of the errors.D)Examine the average level of the errors. **E)None of the above.26.Which of the following forecasting methods requires use of large and extensive data sets?A)Naive methods.B)Exponential smoothing methods.C)Multiple regression. **D)Delphi methods.E)None of the above.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 7 preview image627.When using quarterly data to forecast domestic car sales, how can the simple naiveforecasting model be amended to model seasonal behavior of new car sales, i.e., patterns of salesthat arise at the same time every year?A)Forecast next period's sales based on this period's sales.B)Forecast next period's sales based on last period's sales.C)Forecast next period’s sales based on the average sales over the current and lastthree quarters.D)Forecast next period's sales based on sales four quarters ago. **E)None of the above.ESSAY/PROBLEM EXAM QUESTIONS1.The State of Oregon has a law requiring that all state revenue, raised in excess of whathad been forecast, be refunded to taxpayers. Besides making state residents happy when revenueforecasts understate true revenues, what impact would such a law have on the quality offorecasts? Is revenue forecasting in Oregon a political exercise? How would such a provisionaffect your ability to generate unbiased forecasts? In your opinion, is this a good law?ANSWER: The intent of the law was to force State planners to accurately forecast state budgetsand that any revenue that exceeded forecasts could not simply be spent by politicians.The problem is that forecasters will have skewed incentives, which is an unforeseen consequenceof this statute. For instance, state revenue forecasters may find that it makes politicians happywhen revenues are under forecast since taxpayers get a kicker check in the mail from the State ofOregon. On the other hand, forecasters could be forced to subjectively increase revenueestimates so as not to pay out the forecast-error surplus.Is this a good law? Not from the forecasters prospective, who should be concerned with forecastaccuracy and not the political consequences of a forecast error of a given type.2.Comment on the following quote by a recent graduate from Quant-Tech: "Nobody intheir right mind uses subjective forecasting techniques today. They are always biased andcontain somebody else's opinion, which is certainty nothing that can be trusted."ANSWER: Besides not being true, this comment ignores the simple fact that subjectiveforecasts may contain valuable information that may not be available from quantitativeforecasting methods. For example, situations in which little or no data exist may requiresubjective forecasts. In addition, some forecasters are quite skilled in making subjectiveforecasts of the business cycle. Finally, in Chapter Eight the composite forecast process isdescribed in which subjective methods play an important role.3.Contrast and compare forecasting for a private for-profit firm and for a public not-for-profit firm. Are the two necessarily different from the perspective of the forecaster?
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 8 preview image7ANSWER: Not really. Quantitative methods are equally applicable for profit firms and not-for-profit firms. However, many public goods are not valued in the marketplace, but instead arevalued in the political process. This implies that, in some cases, adequate price data for publicforecasting may not be available.4.How do forecast practitioners rank various forecasting models applied to any givenproblem? Which technique is used most often in practice and why? Explain in-sample and out-of-sample forecast model evaluation.ANSWER: In most cases, the forecaster will have available several different models to forecasta given variable. To select which model is the best, forecasters commonly employ a measurecalled root-mean-squared-error (RMSE), which is essentially the standard deviation of forecasterrors. It is also very important to distinguish between fit and accuracy. Fit refers to in-samplemodel performance, whereas accuracy refers to out-of-sample model performance. In manycases models that perform well in sample perform very poorly out-of-sample. Since forecastaccuracy is always first priority, emphasis should be placed on out-of-sample RMSE rather thanmodel fit. This is usually accomplished by use of a holdout period in the sample. This is aperiod at the end of the sample in which forecasts from earlier periods can be made to access theaccuracy of a given model.5.You are the quality control manager in a plant that produces bunjee cords. Yourresponsibility is to oversee the production of the synthetic material in the cord. Specifically,your responsibility is to ensure that bunjee cords have the correct elastic qualities to avoidpersonal injury lawsuits.Your efforts are compounded in that you use two procedures for testing bunjee cord elasticity,procedure A and procedure B. Procedure A is generally subject to error, but few are very large.On the other hand, procedure B is very accurate but subject to large one-time errors.Specifically, forecast errors in evaluating the dynamic cord elasticity per pound of load arepresented below for a random sample of four cords.Procedure A Forecast ErrorsProcedure B Forecast Errors.01.008-.01-.009-.02-.008.02.03Using mean-absolute deviation (MAD) and mean-squared error (MSE), evaluate the relativeaccuracy of each procedure. Which procedure will you use in quality control testing?ANSWER: To find mean-absolute deviation (MAD) we simply sum the absolute values of eachforecast error and divide by sample size of four. Accordingly, MAD for Procedure A is .015,whereas the MAD for Procedure B is .01375. Accordingly, using mean-absolute deviationcriterion, Procedure B has the lowest average absolute error and therefore is superior.On the other hand, the squared forecast errors are:
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 9 preview image8Procedure A Squared ErrorsProcedure B Squared Errors.0001.000064.0001.000081.0004.000064.0004.0009SUM = .001SUM = .0011MSE = .00025MSE = .000275Accordingly, under mean-squared error (MSE) criterion, Procedure A has the lowest averagesquared error and there is superior.The quality control manager thus faces a dilemma: Under MAD Procedure B is superior, underMSE Procedure A is superior. What should the manager do? Ultimately this depends on therelative costs of large versus small forecast errors underlying the accuracy measures. We suspectthat large errors are more costly to the firm then small, and accordingly apply the MSE measureand conclude that Procedure A is superior.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 10 preview image1Chapter 2MULTIPLE CHOICE TEST BANKNote: The correct answer is denoted by **.1.Why are forecasting textbooks full of applied statistics?A)Statistics is the study of uncertainty.B)Real-world business decisions involve risk and uncertainty.C)Forecasting attempts toreduce the uncertainty foruncertain events.D)Forecasting ultimately deals with probability.E)All the above. **2.Which of the following isnotpart of the recommended nine-step forecast process?A)What role do forecasts play in the business decision process?B)What exactly is to be forecast?C)How urgent is the forecast?D)Is there enough data?E)All the aboveare parts of the process. **3.Of the following model selection criteria, which is often the most important indetermining the appropriate forecast method?A)Technical background of the forecast user.B)Patterns the data have exhibited in the past. **C)How much money is in the forecast budget?D)What is the forecast horizon?E)When is the forecast needed?4.In a time series plotof a typical The GAP store which of the following data patternswould be most prominent?A)Trend.B)Seasonal.**C)Cyclical.D)Random.E)All the above.5.Which of the following isincorrect?A)The forecaster should be able to defend why a particular model or procedure hasbeen chosen.B)Forecast errors should be discussed in an objective manner to maximizemanagement’s confidence in the forecast process.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 11 preview image2C)Forecast errors should not be discussed since most people know that forecasting isan inexact science. **D)You should tailor your presentation to the sophistication of the audience tomaximize credibility in the forecast process.E)None of the above.6.In the model-testing phase of the nine-step process, which of the following refers to thatportion of a samplethat is best to useto evaluate model-forecast accuracy?A)Fit.B)Forecast horizon.C)Holdout period. **D)Accuracy.E)None of the above.7.The textpresentsa guide to selecting an appropriate forecasting method based onA)data patterns.B)quantity of historical data available.C)forecast horizon.D)quantitative background of the forecast user.E)All the above. **8.Which time-series component is said to fluctuate around the long-term trend and is fairlyirregular in appearance?A)Trend.B)Cyclical. **C)Seasonal.D)Irregular.E)None of the above.9.Forecasting January sales based on the previous month's level of sales is likely to lead toerror if the data are _____.A)Stationary.B)Non-cyclical.C)Seasonal. **D)Irregular.E)None of the above.10.The difference between seasonal and cyclical components is:A)Duration.B)Source.C)Predictability.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 12 preview image3D)Frequency.E)All the above. **11.For which data frequency is seasonalitynota problem?A)Daily.B)Weekly.C)Monthly.D)Quarterly.E)Annual. **12.One can realisticallynotexpect to find a model that fits any data set perfectly, due to the____ component of a time series.A)Trend.B)Seasonal.C)Cyclical.D)Irregular. **E)None of the above.13.When a time series contains no trend, it is said to beA)nonstationary.B)seasonal.C)nonseasonal.D)stationary. **E)filtered.14.Stationarity refers toA)the size of the RMSE of a forecasting model.B)the size of variances of the model's estimates.C)a method of forecast optimization.D)lack of trend in a given time series. **E)None of the above.15.Which of the following isnota measure of central tendency in a population?A)Mean.B)Mode.C)Median.D)Range. **16.Which of the following isnota descriptive statistic?A)Median.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 13 preview image4B)Mean.C)Range.D)Variance.E)None of the above. **17.Which of the following isnotan important partof classical statistics?A)Summary measures of probability distributions called descriptive statistics.B)Probability distribution functions, which characterize all outcomes of a variable.C)The use of sampling distributions, which describe the uncertainty in makinginference about the population on the basis of a sample.D)The concept of expected value.E)Allof the aboveare important. **18.The standard normal probability tableA)is equivalent to a t distribution if the sample size is less than 30.B)shows a normal distribution with standard deviation equal to zero.C)is used to make inference for all normally distributed random variables. **D)All the above.E)None of the above.19.The median and mode may be more accurate than the sample mean in forecasting thepopulations mean whenA)The sample size is small.B)The sample size is large.C)The sample has one large outlier. **D)The population is assumed to be normally distributed.E)All the above.20.The arithmetic average of the occurrence of some random variable is also called the_____.A)Range.B)Mean. **C)Variance.D)Standard deviation.E)None of the above.21.In finance, an investor who ignores risk is termed "risk neutral." What descriptivestatistic is our risk neutral investor ignoring when she generates stock portfolios?A)Median.B)Mean.C)Mode.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 14 preview image5D)Standard deviation. **E)None of the above.22.In calculating the sample variance we subtract one from the sample size. This is becauseA)the population mean is unknown.B)of using the sample mean to estimate the population mean.C)the sum of deviations about the sample mean is zero.D)the sample mean is employed.E)All the above. **23.Which statistic is correctly interpreted as the "average" spread of data about the mean?A)Mode.B)Range.C)Variance.D)Standard deviation. **E)Mean.24.Which measure of dispersion in a data set is the most intuitive and represents an average?A)Range.B)Mode.C)Standard deviation. **D)Variance.E)Mean.25.Which of the following isnotan attribute of a normal probability distribution?A)It is symmetrical about the mean.B)Most observations cluster around the mean.C)Most observations cluster around zero. **D)The distribution is completely determined by the mean and variance.E)All the above are correct.26.Which of the following isnota foundation of classical statistics?A)Summary measures of probability distribution called descriptive statistics.B)Probability distribution function which characterize all possible outcomes of arandom variable.C)The knowledge of thousands and thousands of normal probability tables requiredfor statistical inference of normally distributed random variables. **D)The concept of expected value, which is the average value of a random variabletaken over a large number of samples.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 15 preview image627.A company claims that the rubber belts, which it manufactures, have a mean service lifeof at least 800 hours. A random sample of 36 belts from a very large shipment of the company'sbelts shows a mean life of 760 hours and a standard deviation of 90 hours. Which of thefollowing is the most appropriate on the basis of the sample results?A)The sample results do not warrant rejection of the company's claim if the risk of aType I error is specified at .05.B)The sample results do warrant rejection of the company's claim if the risk of TypeI error is specified at .05. **C)Since the sample mean falls below the company's claim, the sample resultsindicate that the company claim is incorrect.D)The sample results are indeterminate since the magnitude of the sample standarddeviation is greater than the difference between the company's claimed figure andthe sample mean.28.Based upon ten years of monthly data, the monthly rate of return of the DOW Jones 30composite stock portfolio was normally distributed with mean .0084 and variance .0014. Whatis the probability, that in any given month, we observe a rate of return on the DOW above 10percent?A)Less than one percent. **B)Two percent.C)Three percent.D)Not enough information is provided to answer the question.29.Suppose you observe the entire population of a random variable and you wish to testsome hypothesis about the mean. To perform your hypothesis test youA)apply a sampling distribution to the problem.B)obtain sample estimates of population parameters.C)simply find the population mean and compare it to the hypothesized value. **D)Apply the t distribution.E)There is no answer to this question.30.If two large random samples are drawn from two populations, each having a mean of$100, the relevant sampling distribution of their difference has a mean of:A)$200.B)The sum of the two sample means.C)0. **D)The difference between the two sample means.31.The sampling distribution of the sample mean, when sampling from a normal populationwith meanand variance2is:A)normally distributed withmeanand variance2.
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Business Forecasting with Business forecastX 6th Edition Test Bank - Page 16 preview image7B)normally distributed with meanand variance s2.C)normally distributed with meanand variance2/n. **D)normally distributed with mean 0 and variance 1.32.Type I errorA)is said to arise when we reject a true null hypothesis.B)has a probability value equal to the significance level of any statistical test.C)is a measure of the uncertainty associated with rejecting any null hypothesis onthe basis of sample data.D)both a) and b) are correct.E)A, B, and C are all correct. **33.The sampling distribution of the sample mean isA)normally distributed with meanand variance2.B)normally distributed with meanand variance s2.C)distributed as a t distribution with variance 1.D)normally distributed with mean 0 and variance 1.E)None of the above. **34.Sampling distributionsA)are the distributions of all possible values of a sample statistic based uponrepeated sampling.B)are used to make inference when the population of a variable is unobservable.C)exhibit important properties for the ranking of alternative estimators such asunbiasedness and efficiency.D)All the above. **35.The null hypothesis is that there is no significant linear relationship between prices andsales. Type I error is:A)To conclude that there is a significant linear relationship when there is.B)To conclude that there is not a significant linear relationship when there is.C)To conclude that there is a significant linear relationship when there is not. **D)To conclude that the correlation coefficient is equal to zero.36.An unbiased modelA)is one that does not consistently over-estimate or under-estimate the true value ofa parameter. **B)is one that consistently produces estimates with the smallest RMSE.C)is one, which contains no independent variable; it depends solely on time-seriespattern recognition.D)is one made up by a team of forecasters.
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