CFA Level I · CFA Level I Exam · Financial Statement Forecasting in Equity Valuation
Which step in the financial statement forecasting process most likely comes first?
Understanding the company's industry and competitive position most likely comes first. This analysis shapes the assumptions used to build the forecasts. Valuation and recommendations come later, and monitoring results and updating forecasts occurs after the initial forecast has been made.
- AUnderstanding the company's industry and competitive positionCorrect
- BPreparing the final valuation and recommendation
- CMonitoring results and updating the forecasts
Explanation
Forecasting begins with understanding the industry, business model and competitive position, which inform the assumptions. Valuation and recommendation follow the forecasts, and monitoring and updating come after the forecasts are in use.
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