CSUGB Accurately Predicting Future Balances Concerns Discussion

Help me study for my Accounting class. I’m stuck and don’t understand.

we have learned how to analyze the financial statements provided in a company’s annual report. These statements are historical in nature – they provide the results and balances that have already occurred. However, we also need to project future statements to help our present decision making objectives. While we can check the accuracy of past results, projected financial statements must be more subjective. Financial statements analysts must ensure that their forecasts are objective, realistic, and unbiased. Some companies’ executives and managers can be too optimistic about their companies’ outlook. As you will be required to create some projected financial statements, discuss some concerns you might have with accurately predicting future balances. Given your concerns about creating forecasts, what are some things analysts should be aware of as they read through the projected financial statements provided by management in the annual reports?