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

A research report's financial forecasts are most likely to be more credible if the analyst:

Forecasts are more credible when the analyst links them to explicit, documented assumptions about industry and company drivers. This lets readers evaluate and update the logic, unlike indefinite extrapolation of past growth or ignoring new information.

  1. Aextrapolates last year's growth indefinitely without adjustment
  2. Blinks forecasts to explicit, documented assumptions about industry and company driversCorrect
  3. Ckeeps assumptions unchanged regardless of new information

Explanation

Credible forecasts rest on explicit assumptions tied to industry conditions and company drivers, which can be reviewed and updated. Mechanical extrapolation or ignoring new information reduces reliability.

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