Chapter II

The Stock Selection Guide—the First Page

What we’re going to cover

This section is going to focus on the first section of the SSG: the graphical analysis.  The company that will be used in this program is Clayton Homes Company (CMH).  This company is trade on the NYSE.  Clayton Homes has been a popular company among NAIC members: it’s a company whose stock seems to be facing a challenge recently!  Clayton Homes (to quote Value Line) is engaged in the manufacture, sale, and financing of low- to medium-priced manufactured homes.

Clayton Homes will be used strictly as an example to illustrate the tools that the NAIC provides.  This company is presented as an illustration only.  The presentations are for education purposes and should not be taken as any form of advice.

Please note that in 2004, Warren Buffett--actually Berkshire Hathaway--purchased Clayton Homes in its entirety.  Clayton Homes is no longer a publicly traded company.

The SSG has four main sections.  (i) The company information is completed in the top right hand side; (ii) quarterly information is located on the top left hand side of the graph area; (iii) the results of the graphical analysis, which are situated on the bottom two-thirds of the SSG; and (iv) historical and projected growth in earnings and sales found on the bottom of the graph.

The company information should be completed first.  All information is found in the Value Line report.  A blank and completed SSG is included below.

Figure 1 Blank SSG for Company Information

Figure 2 SSG Company Information completed for CMH

General Information Section

The completed information section for Clayton Homes is shown above.  The name of the company and the date on which the SSG was completed are provided on the first line.  The second line gives the initials of the person who prepared the reported together with the data source.  Line three shows the exchange and the industry.  Clayton Homes is in Manufactured Housing and Recreational Vehicles.  Many people use unique initials for the industry (their own code), or use the SIC number which is more universal.  A reference line is given right under this last line.  Here, I have indicated that the source was Value Line, volume 10 page 1552.  Some people put the date of the Value Line report here, providing solid documentation for the precise source of the data.  A copy of the Value Line report can be found at the end of this chapter.

The box right below the general information provides information about the capitalization of the company.  Capitalization is discussed in Appendix 3.  The first section asks for information on the number of preferred and common shares.  Preferred shares were discussed earlier; Clayton Homes has no preferred shares.  The Capitalization section on the Value Line provides this information.

The percentage of insider and institutional ownership can also be found in Value Line.  Insider ownership is provided in the business summary section.  For Clayton Homes, insider ownership is high—27%.  Institutional ownership has to be calculated.  The total number of shares held by institutions is found in the “Institutional Decisions” section, while the total number of shares outstanding can be found lower down in the Capital Structure section of the report.  Dividing the number of shares currently held by institutional investors by the total number of shares outstanding yields the proportion of the total number of shares in the hands of institutions.

The next subsection talks about “% to Tot. Cap.”  In other words, what percentage of the total capitalization is in the form of debt.  Think about this point for a moment.  We talked about this point earlier.  The assets for your company are funded by either debt or equity—you borrow to buy them, or shareholders fund them.  Here you calculate what percentage is funded by debt.  If you look at the Capital Structure section of the Value Line report, you see that 9% of the total capitalization of Clayton Homes is with debt.

The percent dilution is not as critical now, thanks to FASB 128—the rule that companies should report EPS on a basic and diluted basis.  For your information, Value Line uses diluted EPS from 1997 on.  If a company went back and restated its earnings as diluted EPS—for example, Pfizer provides information for ten years including diluted EPS—then these numbers may then be reported in Value Line.

Plotting numbers on the graph

We’re going to plot information onto the graph section of the SSG.  We’ll plot four things: revenues, EPS, the high share price for a year and the low price.

Take a look at a blank SSG that came with this handout.  First of all, look along the horizontal axis—the axis that runs from bottom left to bottom right.  You see fifteen, evenly spaced lines.  Each of these vertical lines will represent a different year.  We are going to plot ten years of information taken from the Value Line report for Clayton Homes.  The first vertical line, on the far left hand side will be 1990, the second 1991 and so on.  The tenth line—a thicker line—is 1999, the latest year for which have complete financial information.  The lines to the right will be for the year 2000, 2001 and so on; here’s where we will project into the future.

The vertical lines are evenly spaced; however, as you move up the graph, you see that the horizontal line spacing is not even.  The reason is that you’re using a log/normal graph.  It’s logarithmic (or log) on the vertical axis and normal on the horizontal.  Plotting on a log scale is great for a number of reasons.  First off, if you plot a series of data that’s increasing at a steady rate, you’ll get a straight line.  The human eye is simple awesome at spotting a straight line!  Also, if something is growing quickly you’d need a huge graph if you used regular graph paper.  Log paper ‘squnches’ it down!

Now the horizontal axis will always represent the year; however, the vertical axis will represent a number of different things.  Remember, you are plotting three different things on one sheet of paper.  If you have already plotted revenues, forget all about it and what that sales graph means.  Concentrate on plotting EPS as if nothing else is on the graph.  Let’s start by plotting revenues.

A manually completed SSG for revenues can be found on a page to follow!  Look at the axis on the left hand side and compare it to the numbers in the value line report.  Sales in 1990 were 260.3 (that’s 260.3 million dollar).  By 1999, sales reach 1344.3—over five times what it was ten years ago!

The great thing about the vertical axis is that the numbers can mean anything.  2, 3 and 4 could be 2, 3, and 4 million dollars; or 200, 300 and 400 million; or 20, 30 and 40 billion.  You select whichever makes the most sense.  If you’re plotting a very small company, perhaps it will have sales in the millions; a larger company may have sales in the hundreds of millions; a huge company may have sales in the billions.  When you complete an SSG for different companies, you’re kind of standardizing the presentation.  The size of a company has relevance, but we are more interested in the behavior of the sales growth.

Refer to the Value Line report for Clayton Homes—it’s in Appendix 3.  Just below the graph you find a huge grid of numbers—financial information for the company.  The first ten or so lines are “per share” data , number of shares or ratios.  This subsection is bordered by a slightly thicker line that also happens to form the top of the Capital Structure box (over on the far left of the report).  The first series of numbers below this line is usually the annual revenues.  These figures are the numbers that you will plot on the SSG graph.

As stated previously, Clayton Homes revenues have grown from $260.3 million in 1990 to $1344.3 for the last reported fiscal year (1999).  On the graph, the number 10 on the vertical axis is used to represent $1 billion.  The revenue information for 1990 is plotted on the left-most vertical line and each year is plotted in sequence on the lines that follow.  Dots are used to represent the point; however, these dots are circled, making them stand out more.  If you want to, you can draw a line connecting the ten dots.  It’s already done on the graph.

Figure 3 SSG Graph: Plot of Clayton Homes Revenues

EPS is often the third line down in the Value Line survey.  Earnings per share, EPS, grew from 18¢ in 1990 to $1.06 in 1999.  The axis on the left hand side represented hundreds of millions of dollars when revenues were plotted—now it represents pennies.  The number one on the bottom left will be a dime, two is 2 dimes, 10 is a dollar.

The EPS numbers are plotted sequentially from left to right starting with 1990 and ending with 1999.  A triangle is drawn over the dots to make them stand out.  These dots are then connected with a line.  The graph with the revenues and EPS both plotted will follow.

The final thing that should be plotted on the graph is the high and low share prices for each year.  The high and low share prices are found at the very top of the graph in the Value Line survey.  For 1990, the high price was $3.1 and the low price $1.4.  On the SSG graph, I will let the number 1 represent $1.  I put a nick on the vertical axis were 1.4 and 3.1 are—these now represent $1.4 and $3.1 the low and high prices.  I then connect them together to show the trading range—low to high—for the year.  This activity is repeated for each of the succeeding nine years.

Determining the rate of growth of sales and EPS

You now have three things plotted on the graph: revenues, EPS and the stock price trading range.  One question that we’re going to want answered is how fast are those revenues and earnings growing.  The answer to this question will be important later on.  The first thing we can tell, by just looking at the graph, is how consistent the rate of growth is.  If we have a perfect straight line (like you will see if you plot Abbott Labs, it implies steady growth.  If the line is bouncing all round the place (Boeing) is an example, then the situation is less predictable.  The growth rate for Clayton Homes is reasonably predictable.

What we’re really trying to do is to figure out what straight line best represents the ten years of revenue information (and what other straight line can be used to represent EPS).  There are a couple of ways to do this.

Computer fit.  This method is the most accurate.  If you use NAIC software, such as Toolkit or Stock Analyst, these will fit a straight line to the data.  This method is also called the “area method”.  A line is drawn such through the points and any shapes formed are shaded in.  The best fit is obtained when the shaded area above and below the straight line is equal.  When you fit a straight line using a computer program, it may give the most accurate result, but judgement must be applied to determine if this result is relevant!

Best fit: if you elect to complete SSG’s by hand, this option will rapidly become your method of choice.  The human eye is phenomenal at fitting a straight line to plotted numbers.  As the name might suggest, you place a ruler on the graph and draw, what you believe to be, the best straight line to represent the trend in the numbers.  As you become experienced, you will grow more comfortable with this method, as you begin to realize just how accurate it can be.

Peak Method: In this method, you look for two peaks that stand out in the line connecting the dots.  You draw a straight line between these peaks and use this line to represent the trend in the data.  An actual example follows.

Midpoint method:  In most circumstances for growth companies this method is probably the best one to use.  In essence you find two numbers to represent the ten you have plotted; you plot these two numbers and draw a line between them.

The midpoint method works best when the trend in the data looks linear.  The application of the midpoint method is straightforward.  The midpoint method was used in the SSG above for Clayton Homes.  I’ll illustrate how it was applied using the information from Value Line.

In the table below, you will find the EPS data for 1990 through 1999 divided into two groups.

*Sales in millions of dollars.

The numbers in each group are added together giving the total, then this total is divided by five.  Five is the number of years represented in each of the two groups.  The average for each group is then plotted on the year representing the middle of the group: 1992 for the first group and 1997 for the second.  This procedure is then repeated for EPS.

Once the two points are plotted, a line is drawn between them.  On the figure that follows, a dashed line is drawn for both sales and EPS.  Ten years of information is condensed into two points.  The lines connecting the two points represents the growth in revenues and earnings, respectively.  This line is called the trend line.  The task now is to calculate how fast that growth occurs.

Calculating Growth:  There are a few ways to calculate the growth in sales and EPS.  For sales, the average grew from $411.30 to $1036.12 in five years—an increase of 151.9% over the five years.  Our goal now is to convert that number into an annual rate of growth.

One very simple way of doing this step is to go over to where the trend line cuts the left hand axis.  Put your ruler on this point and measure down to the bottom left-hand side of the graph.  It’s the point where there’s a 1 and 0—a lot of lines fan out from this point too.  You measure this distance and write it down on a piece of paper.

You then move your ruler over to the right hand side of the paper to where the trend line cuts the vertical axis.  You put the ruler on this intersection point, then measure down, the same distance you must recorded on the left-hand side.  You draw a nick on the paper at that point.

You notice a lot of lines fanning out from the bottom left and ending on the right hand side of the page.  They are identified as 4%, 10%, 15%, etc.  If the nick you just drew were half way between the 15% and 20% lines, it means the annual growth rate of your trend line is between 17 and 18%.  You have to do a little interpolation here.  If it’s close to the 15% line, then you could say it’s 15%.  A fifth of the way up between 15 and 20% could mean 16% growth, and so on.  This method is a quick and dirty (though surprisingly accurate) way to calculate the annual rate of growth of your trend line.

Handling Outliers

An outlier is a piece of information that deviates markedly from a clear trend.  Outliers occur more frequently in EPS than in revenues.  Since earnings come from revenues, everything that affects the top line will also affect the bottom line.  Handling outliers can be tricky.  Four times out of five, you’re probably justified in ignoring the offending piece of information; however, it’s always a good idea to have some justification for the decision.  If you have access to the annual report, the 10-K, or an analyst’s report, you will probably find an explanation for the unusual behavior observed in the data.

Dealing with outliers demands judgement—it’s something better learned than taught.  Unfortunately, judgement is a synonym for experience.  Eliminating a number because it “ruins the look,” or because, “you just don’t like it” aren’t really reasons.  Most of the time, for a solid company, an unusual number is just that—unusual and not part of a trend.

I want to show some examples of outliers.  I won’t necessarily identify the names of these companies.  It’s not important to the discussion.  What is important is identifying an outlier and developing a plausible explanation as to why the deviant number is not of concern.

In the first example, which is FedEx, earnings took a dip even though sales kept on buzzing along.  It turns out that a spike in oil prices triggered the sharp dip in earnings.  You’re probably justified in deleting this single year, since the event was unusual—something that would bias disproportionately the trend in earnings.

Something happened to this company in year 4.  There is a trend in earnings at the get-go which then take a dip in year 4  The earnings recover and grow at the same rate as they did during years 1 to 3.  On reading the annual report, the company had a major restructuring with the sales of some assets in year 4.

This sale slowed revenues for the next few years, but the restructuring program, which continued, helped cut expenses sharply.  Thus, aside from a dip in year 4 due to a restructuring charge, the earnings growth was unaffected.

What happened to this company is interesting.  Sales and earnings had grown steadily for a number of years, but a consolidation trend in the industry could not be ignored.  In year 10 the company made a major acquisition.  While sales and pretax profits moved up sharply, other expenses, affected earnings, which dipped.  It remains to be seen if the company can successfully manage this new, larger entity.

If you get a satisfactory explanation for any strange looking behavior, it increases the justification for eliminating that point.  Note, nowadays most strange charges happen after the bottom line, so the work is done for you—more on this point later.

Run, run like the wind.  This company appears to be a bit of a mess.  In years 4 and 8 the company sold some assets.  While these one time expenses are clear, the fact remains that revenue growth (when it occurs) is abysmal.  Sometimes, the problem isn’t outliers, the problem is the company.  This example is not of a growth company.  Revenues appear flat, and earnings (and pretax profits) have started to decline.

This company is interesting.  A charge in year 10 forced earnings and PTP to decline.  Sales have a solid 10-year history.  Interestingly, EPS recovers in the first two quarters of year 11; however, sales appear to be slowing down.

There are some contradictory events in this company.  It might be worthwhile investigating the reason for the charge.  Certainly this company should probably be on the radar screen.  If sales continue to grow as in the past, then it may be worthwhile investigating this company further.

When we cover the PERT in Chapter 5, you can “get under the hood”: study the numbers in even more detail!

Projecting into the future

What we’ve done so far is examine ten years of history.  We’ve looked at the past trend in revenues and EPS; these have been plotted on a log-normal graph.  If we like this trend, great!

When projecting into the future, I am reminded of that great economic sage Alan Greenspan.  When reappointed to head up the Federal Reserve recently, during the announcement he came out with a great line “the future is fundamentally unknowable.”  Great isn’t it J.  These words should be taken to heart.  The future is fundamentally unknowable.  A person or company could get news at any moment that has a dramatic impact on what’s to come.

When you examine the sales of a company like Clayton Homes, you see ten years of unbridled growth.  The company has had to weather storms—the Gulf War, a recession, changing interest rates, competition, and so on.  Despite all these things, the company continued to generate sales—and steady growth in sales—year after year.  We’re looking at a company that can cope with its external environment.

Later, when section 2 of the SSG is examined, there is more evidence that management is in control of the company.  However, based on the behavior of revenues and EPS, things look good.  If nothing else changes in the external environment—if the company meets threats similar to those encountered in the past, we should expect the future to unfold pretty similar to what we’ve seen in the past.

Now, in the world of all things financial, there is a saying that “past performance is no guarantee of future returns.” (or words to that effect!)  These words should be etched in stone.  They are true.  However, when it comes to predicting the future—that great unknowable thing—there are only bad indicators.  Past performance is probably the best of bad indicators.  Let’s be honest, when you visit a house, you might see a sign with the silhouette of a hound that says “Beware of the Dog.”  If the house were owned by a financial analyst, he or she might have the silhouette of the dog, but the by-line “past performance is no guarantee of future behavior.”  I wouldn’t pet the dog!

We rely on résumés, we buy books written by authors we know, we use airlines that haven’t yet lost our baggage.  Everyone is well aware that the future is unknowable, but there are trends in past behavior that just cannot be ignored.

The assumption used in the SSG analysis is that the past is a guide for the future—not a guarantee.  If the growth rate in the past was a stable 18%, we might expect a similar rate in the future.  However, the following guidelines to projection future returns from past performance may prove to be useful.

1.    Never project the future growth to be better than that observed in the past;

2.    Never project EPS to grow faster than sales

3.    If the growth rate appears to be slowing down, use the new, slower growth rate, rather than the composite growth rate for the past ten years.

4.    Use the preferred procedure to project EPS

5.    Never project growth rates with less than 5 years of historical information

6.    If there is a recent change in management, be leery about projecting past growth rates.

7.    Be conservative.  When using an historical growth rate, throttle back a little for future returns.  If you are happy with a 15% growth rate, you’ll be ecstatic if it turns out to be 18%!

8.    If it looks too good to be true, it is

9.    You are not going to be right all the time; accept you will make errors when it comes to projecting growth

10. Be conservative

The bottom line is that it’s better to have a future filled with pleasant surprises rather than nasty shocks.  As you’ll see when we proceed through the SSG, the assumptions made regarding future growth have a pivotal impact on the outcome of the analysis.

Page 1 of the SSG for Clayton Homes has been completed; you’ll find the hand-drawn graph a few pages back.  The rate of historical growth in EPS was determined using the midpoint method.  That growth rate was 21%.  If this method is applied to revenues, the rate of growth is somewhere around 19 or 20%.

When you examine the trend line in a little more detail, you see that the actual revenues for 1997, 98 and ’99 lie under the line.  In other words, the growth rate in revenues is actually slowing down.  If recent results lie under the trend line, then the rate of growth is slowing; if these results lie above the trend line, then the growth is speeding up. 

If you observe a trend, you can explore it further.  For the case of Clayton Homes, Value Line provides three quarters of financial information for fiscal year 2000.  With this information, we can plot a rolling annual revenue results.  A completed SSG using Toolkit can be found in Appendix 2.  The rolling annual revenues have been plotted—they are the dots after that extend beyond revenues into the area that represents fiscal year 2000.

Refer to the Value Line survey in appendix 3.  Find the quarterly revenues, reproduced here.  This information will be used to calculate a rolling annual revenues.

Figures in italics and bold font are estimates and will not be used in the analysis that follows.  The calculation will start with the information report in September 1997—the first quarterly results for fiscal year 2000.

The column on the left hand side indicates the quarter for the fiscal year in which the rolling annual reports could be reported.  It looks like revenues are slowly slipping.  Revenues peaked in the 1^st quarter of fiscal year 2000, then slipped in the 2^nd and 3^rd quarters.

The annual change from Q₄ 1998 to Q₄ 1999 is calculated below.

The annualized rate of growth in revenues is provided in the column on the right-hand side.  The growth rate is changing—slowing down just like the graph indicated.

This company has weathered storms in the past.  As we shall see in the SCG, there are problems in this industry.  Clayton Homes appears to be well suited to survive.  On this basis, I will project a growth rate of 15%—substantially slower that what has been witnessed in the past, but at the same time, respectful of the clear slow-down in revenue growth.

When projecting EPS, there are two methods— projection based on ten years of history, or the preferred method.  The preferred method will be discussed in detail when section 2 of the SSG is covered.  For now, the first method will be covered.

Projecting the EPS is similar to projecting revenues.  You select a rate of growth that represents what the company has done in the past.  The historical earnings growth has been 21+%; however, it is also clear that the rate of growth of earnings is slowing.  The rate of growth was calculated from the midpoint method, which is illustrated in the hand-completed diagram a few pages back.  If revenues are projected to grow at 15%, EPS should be projected to grow at or below that rate.  For completeness, the analysis on revenues will be repeated on EPS.  The Value Line information follows.

Once again, the rate of growth of EPS appears to be slowing down.  This slowdown is clear from the graph and from the simple analysis above using the quarterly EPS information from the Value Line report for Clayton Homes.

The ten-year EPS growth has been quite impressive.  For now, the EPS will be projected at 15% annually; however, the user would be justified in using a growth rate of 10 or 11%.  If it turns out that you are happy with these rates of growth, you’ll be ecstatic if the growth rate hits 15% or even ends up mirroring the historical behavior!

In this analysis revenues and EPS growth is projected to grow at 15% annually.  As mentioned previously, when we look at the preferred procedure in the next chapter, the growth rate for EPS will be predicted from that of sales.

Recent quarterly figures.

The “recent quarterly figures” section is found on the SSG in the upper left-hand corner of the graph.  A completed SSG is found in Appendix 2.

Looking at the change in quarterly revenues and EPS gives a ‘sanity check.’  It’s informative to compare the most recent quarter in this fiscal year with the same quarter in the previous fiscal year.  In many instances, sales and EPS tend to be cyclical within a year.  Retail stores tend to sell more merchandise during the holiday season; garden materials sell in the summer, snow plows in the winter, &c.  The comparison for revenues and EPS is shown below.

Revenues

EPS

To get the percentage change from the year ago quarter to this one, you do the following:

The subtraction does not depend on which of the two numbers is larger.  If the year ago quarter produced higher results, it means that there was a decline—yielding a negative growth rate—compare to the current quarter.

The information for the quarterly change is filled into the appropriate box on the SSG.  It is always a good idea to write a note detailing from which quarter the information comes.  In the completed SSG in Appendix 2, the note is

FY 2000 Q3  (Ended 3/31/2000)

The quarterly information echoes what we noticed on the graph and on the quick analysis above—revenues and earnings are slowing.  It will be interesting to see the full fiscal year results when they become available.  If the trend above continues, revenues might grow by only 2% and earnings by 7 or 8%.  Keep in mind something else too: when management expects earnings growth to slow (or even drop), a lot of charges are “piled on” to the last quarter—charges that could have been taken later.  The rational is that people usual focus on the fact that the news is bad—not how bad!  It’s better to take the hit now compared to later.  If such an event occurs, and the Value Line analyst believes that they are non-recurring, the analyst will add them right back in!

Review

The focus in this chapter has been on plotting the Value Line graph.  Clayton Homes was used as an example.  Revenues, EPS and stock price range were plotted for ten years.  This information was reviewed critically and a future growth rate for revenues and EPS was estimated.  This growth rate will be used later in this text.

Questions

1. SSG stands for

(a)    stock sorting and grading

(b)   stock selection guide

(c)    securities selection graph

(d)   stock selection guarantee

(e)    selection of securities through graphing

2. The information section contains each of the following except

(a)    total company assets

(b)   where the stock is traded

(c)    source of the data

(d)   number of common shares

(e)    % institutional holders

3. Which of the following is plotted on the SSG graph

(a)    earnings, book value and share price

(b)   revenues, sales and cash flow

(c)    assets, revenues and liabilities

(d)   earnings, equity and debt

(e)    revenues, earnings and stock price

4. The stock selection guide has

(a)    ten years of projected and five years of historical information

(b)   five years of earnings and ten years of revenues

(c)    fifteen years of historical information

(d)   ten years of historical and five years of projected information

(e)    none of the above

5. Which of the following is not a method for estimating growth

(a)    the area method

(b)   the random selection method

(c)    the peak method

(d)   the midpoint method

(e)    computer fitted graph

6. With the midpoint method

(a)    Ten years of information is converted to five

(b)   The best looking line is selected

(c)    Ten years of information is condensed to two points

(d)   Revenue growth is always faster than earnings

(e)    Five years of information is expanded into ten

7. When determining the rate of growth of revenues or earnings it is

(a)   critical to be precisely correct

(b)   important never to project revenues to grow faster than earnings

(c)   good to choose 5, 10, 15, 20 or 25%

(d)   vital to use the price bars as a guide

(e)   good to get a reasonable estimate of the growth

8. When projecting into the future, NAIC recommends that

(a)    you never exceed the historical rate

(b)   you never project EPS faster than sales

(c)    more recent information is more important than distant data

(d)   all of the above

(e)    none of the above

9. Recent quarterly figures

(a)    are good as a “sanity check” on your projections

(b)   should be used as the new growth rates

(c)    are always cyclical and mean nothing

(d)   always overestimate growth

(e)    always underestimate growth

10. Revenues are

(a)    a form of debt

(b)   a form of equity

(c)    plotted on the SSG

(d)   all of the above

(e)    none of the above

11. EPS stands for

(a)    earnings plotted sideways

(b)   extraordinary purchases or sales

(c)    earnings per share

(d)   earnings on preferred shares

(e)    efficiency through productivity and squandering

12. If you have less than five years of historical information

(a)    use the preferred method as a stop gap

(b)   guess what the missing numbers might be

(c)    you cannot use the SSG

(d)   plot using the information that you have

(e)    none of the above

13. If historical earnings are growing faster than sales it means that

(a)    profit margins could be shrinking

(b)   profit margins could be increasing

(c)    expenses are growing

(d)   more shares must have been issued

(e)    none of the above

14. If sales are flat it means that

(a)    you’re not studying a growth company

(b)   the future can only get better

(c)    the company has issued more shares

(d)   all of the above

(e)    none of the above

15. In calculating quarterly growth you

(a)    subtract the past quarter from the recent quarter

(b)   subtract the recent quarter from the past quarter

(c)    add the recent quarter to the past quarter

(d)   you divide the recent quarter into the past quarter

(e)    you multiply the past quarter by one hundred percent