In forecasting future cash flows and corporate earnings financial analysts often use a topdown approachOutline and explain three different forecasting models that are used inforecasting future earning

Econometric models: This model uses statistical methods to analyze historical data and identify relationships between different economic variables and earnings. The model then uses these relationships to forecast future earnings based on expected changes in the economic variables. The econometric model is useful for forecasting earnings in stable economic conditions where there is a clear relationship between economic variables and earnings.

Time-series models: This model uses historical data on earnings to identify trends and patterns in the data. The model then uses these patterns to forecast future earnings. Time-series models are useful for forecasting earnings in industries or companies where there is a high degree of seasonality or cyclical patterns.

Judgmental models: This model relies on the expertise and judgment of analysts to forecast future earnings. The model takes into account qualitative factors such as industry trends, management changes, and changes in the competitive landscape. Judgmental models are useful for forecasting earnings in industries or companies where there is a high degree of uncertainty or where there are significant changes taking place. However, this model is subjective and can be influenced by biases and personal opinions of analysts