Huhuh

To forecast or not to forecast?

Bew are firms that avert to disregard annual financial targets

Feb 26th 2009 | from the print edition



[pic]Illustration by Claudio Munoz
DIVINING what the future holds is tricky at the best of times; at the worst, it is devilishly difficult. So why bother? Citing the chaos of the worldwide downturn, a growing number of companies, including Unil eer, an Anglo-Dutch consumer-goods firm, Costco, a big American retailer, and Union Pacific, one of Americas big railroads, cave in decided not to give annual bread estimates for 2009.

If incessantly there was a moment for firms to keep their crystal balls chthonian wraps, this may appear to be it. tho many companies are still issuing annual forecasts in spite of the doubtfulness roiling their markets. On February 24th, for instance, Home Depot, another American retailer, estimated that its revenues and earnings per share from continuing operations would decline by around 9% and 7% respectively in its 2009 financial year. anterior this month, Reckitt Benckiser, another European consumer-goods group that competes with Unilever, said it was confident it could ontogeny its revenues by 4% this year.

Issuing such targets is pointless and dangerous, critics claim.



They manage that, with the banking industry catatonic and consumers pulling their purse strings ever tighter, the world is so topsy-turvy that any financial aspiration will be out of date as soon as the ink dries on the press release. Moreover, when companies then issue a mea culpa and lower their forecasts, disappointed investors will hammer the expenditure of their shares. To avoid this punishment, managers will be tempted into short-termism, slashing investment in research and development or new machinery, for instance, even if that amends their firms longer-term prospects. Better, then, to stay mum rather than risk a mauling.

But such arguments do not mean that companies should ditch forecasts altogether. just because peering...If you want to get a full essay, order it on our website: Orderessay



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