Question

In forecasting future cash flows and corporate earnings, financial analysts often use a "top-down" approach.

REQUIRED:

(a) Outline the "top-down" approach used by financial analysts.

(b) Explain the so-called systematic forecasting of cash flow from financial statements in Lundholm and Sloan (2013).

(c) Explain the motivation why academic research has turned to the model-based forecasts of eamings in recent years

(d) Outline and explain three different forecasting models that are used in forecasting future earnings in academic literature.