CFA Level I · CFA Level I Exam · Equity Analyst Research Reports
Which of the following is the most appropriate way for an analyst to present risks in a research report?
The analyst should discuss the factors that could cause actual results to differ materially from the forecasts and valuation. Risks should be specific to the company and industry. Omitting risks or using generic wording gives readers too little information to judge the recommendation.
- AOmit risks that management considers unlikely
- BDiscuss the factors that could cause actual results to differ materially from the forecasts and valuationCorrect
- CDescribe risks only in general terms that apply to all companies
Explanation
The risk section should identify company-specific and industry factors that could make results deviate from forecasts and the valuation. Omitting risks or being generic fails to inform readers.
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