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Earnings are volatile because there are a lot of factors that influences them.
- Analyst would first assess the Industry, since Market size and market share can only be assessed when the industry is accurately described;
- Costs are usually calculated after the revenues;
- There are 4 main drivers:
- Industry classification;
- Suppliers and Buyers;
- Revenue Projections;
- Cost Base.
Reflection based on the personal thesis project:
One of the objectives of my thesis is to building a business case. We have learnt that understanding the industry helps to identify the key operation of the company. The business case should contribute to the core operation of the company. Otherwise, the proposed business case is hardly considered by the management.