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CFA Level I · CFA Level I Exam · Equity Analyst Research Reports

A research report gives a buy rating, but its valuation section uses a single set of forecasts with no discussion of how the result changes if key assumptions differ, and its risk section is generic. Which change would most likely improve the report's usefulness to readers?

Adding scenario or sensitivity analysis tied to specific, company-relevant risks would most improve the report. It shows how the valuation and rating respond to changed assumptions and makes the risk discussion meaningful. Removing the valuation or abandoning the view would weaken, not strengthen, the report's purpose.

  1. ARemoving the valuation section to shorten the report
  2. BAdding scenario or sensitivity analysis tied to specific, company-relevant risksCorrect
  3. CReplacing the rating with a statement that the analyst has no view

Explanation

Readers need to see how the valuation and recommendation respond to changes in key assumptions, and risks should be specific to the company. Removing valuation or dropping the view reduces the report's value and defeats its purpose of supporting a recommendation.

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