Which of the following are true concerning forecasting interest income?
I.It is a nonoperating measure.
II.Its typical forecast driver is revenue.
III.It is typically the same from year to year for firms that generate high cash flow.
IV.The typical forecast ratio is interest income in the current period divided by excess cash in the previous period.
A)I and II only.
B)I and IV only.
C)II and III only.
D)III and IV only.

Question

Quizplus · Accepted Answer

I is true - Interest income is generally considered a nonoperating measure as it is not derived from the primary business operations of a company.
II is true - Revenue is a typical driver for forecasting interest income. 
III is false - Interest income may vary from year to year, even for firms with high cash flow. 
IV is false - The typical forecast ratio is interest income divided by the average balance of interest-earning assets, rather than excess cash in the previous period. Therefore, only statements I and IV are true.

Which of the Following Are True Concerning Forecasting Interest Income