QUESTION: “CMC pictures” believes that they can break the $2m gross revenue barrier in couple of years by adding “drama” genre movies to their portfolio. to that end, which of the following big guns of analysis can they use to predict their revenue at the end of two years?
A. Correlation
B. T-Test
A. Multiple Regression
D. ANOVA
EXPLORATION:
To predict their revenue at the end of two years, “cmc pictures” can use financial analysis tools such as pro forma financial statements, discounted cash flow analysis, and scenario analysis.
Pro forma financial statements involve creating projected financial statements based on assumptions about future revenue, expenses, and other financial metrics. By projecting revenue and expenses, “cmc pictures” can estimate their potential revenue based on adding drama genre movies to their portfolio.
Discounted cash flow analysis involves estimating the present value of future cash flows, based on assumptions about future revenue and expenses. By discounting expected cash flows back to their present value, “cmc pictures” can estimate their potential revenue at the end of two years.
Scenario analysis involves creating different scenarios with different assumptions about revenue and expenses. By creating multiple scenarios and estimating potential revenue for each scenario, “cmc pictures” can assess the likelihood of breaking the $2m gross revenue barrier in two years.
Out of the options listed, “multiple regression” would be the most suitable analysis tool for “cmc pictures” to predict their revenue at the end of two years.
Multiple regression involves analyzing the relationship between multiple independent variables and a dependent variable. In this case, “cmc pictures” can use multiple regression to analyze the relationship between their revenue and factors such as the number of drama genre movies they add to their portfolio, their marketing and advertising budget, and other relevant factors.
Through multiple regression, “cmc pictures” can estimate the expected revenue based on the impact of these factors, allowing them to make informed decisions about their strategy and whether they can reach the $2m gross revenue barrier in two years.
Correlation and t-tests are statistical methods used to analyze relationships between two variables, while ANOVA is used to analyze differences in means between two or more groups. While these methods may have some use in analyzing certain aspects of “cmc pictures”‘s business, they are not as directly relevant for predicting revenue based on multiple factors.
ANSWER: C. Multiple Regression
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