Suppose that on its historical Income Statements, a firm always split its total depreciation and amortization between the Cost of Goods Sold and SG&A. Thus, when we forecast those accounts (namely, CGS and SG&A) we implicitly, and correctly, forecast the firm's depreciation and amortization. Nonetheless, why must we always separately forecast depreciation and amortization as part of our forecasting model? Be brief!

Suppose that on its historical Income Statements, a firm always split its total depreciation and amortization between the Cost of Goods Sold and SG&A. Thus, when we forecast those accounts (namely, CGS and SG&A) we implicitly, and correctly, forecast the firm's depreciation and amortization. Nonetheless, why must we always separately forecast depreciation and amortization as part of our forecasting model? Be brief!

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter13: Valuation: Earnings-based Approach

Section: Chapter Questions

Problem 11QE

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