TRUE OR FALSE

equired Homework Questions The concept of earnings power is the long-term (3 to 5 year) expectation of the company's earnings after any near-term anomalous behavior has passed. Forecasts are generally focused on the next 3 months. Normalized Earnings focus on predicting one-time and non-recurring items. Forecasts may be qualitative or quantitative. Forecasting is quite different than Financial Statement Analysis Forecasts are only used to establish budgets.quired Homework Questions forecasts should reflect an investment thesis, be it positive or negative. It is more important now than ever that analysts consider companies' strategic uses of cash flows when creating high quality forecasts of future financial performance. Analysts must perform an in-depth Fundamental Analysis to make forecasts reflecting a basic understanding of the company. A sell-side analyst publishes research reports that only include an investment rating. Strategic uses of cash is not important to a financial analysts in making forecasts. The average of the sell-side equity analyst earnings estimates is called the 'Consensus'. A defensible forecast is one where the company forecasts are in sync with the investment thesis or story. Equity valuations are relatively insensitive to the consensus estimate. Companies frequently issue financial guidance for the next quarter and year's financial outlook