The
following comment appeared in the financial press: "Inadequate financial
disclosure, particularly with respect to how management views the future and
its role in the marketplace, has always been a stone in the shoe. After all, if
you don't know how a company views the future, how can you judge the worth of
its corporate strategy?" What are some arguments for reporting earnings
forecasts?
Arguments for
providing earnings forecasts include:
(a) Investment decisions are based on future
expectations; therefore, information about the future facilitates better
decisions.
(b) Forecasts
are already circulated informally. This situation should be regulated to ensure
that forecasts are available to all investors.
(c) Circumstances
now change so rapidly that historical information is no longer adequate for
prediction.
