Q: When considering projections based on last actual, what if the most recent year is an anomaly?
A: In a practical sense, it would be very difficult to identify the most recent year as an anomaly, if, in fact, it were. You would look for one-time events and you would look for performance in various areas that departed significantly from the prior year's performance, e.g., a massive increase or decrease in sales.
But all this comes back to accepting last year's performance ratios UNLESS there is a compelling reason to change. Consequently, it is the lender's job to identify those areas of performance where he or she needs to probe closely to determine if there is a compelling reason to change. By so doing, the lender explores whether last actual performance measures are anomalies or not. If anomalies, then there is a compelling reason to determine different and more likely values. If not, then accept last year's performance ratio – sales growth of 5.94%, for example – since there is no compelling reason to change it going forward.
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