When Trying to Predict Future Profits, Analysts Often Take a Top-Down

question 154

True/False

When trying to predict future profits, analysts often take a top-down approach which starts with gathering economic and industry data to supplement what they are able to find out about the specific corporations they follow.

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Definitions:

External Financing

Funds raised from sources outside the company, including banks, investors, or public markets.

Operating Capacity

The maximum output or the level of service that a company can achieve with its current resources under normal conditions.

Dividend Payout Ratio

A financial metric that shows what percentage of a company's earnings are distributed to shareholders as dividends.

Additional Debt

Borrowing more funds in addition to existing debt, which can increase a company's leverage and financial risk.