skills/three-statement-model-builder/references/forecast-judgment-guide.md

# Forecast Judgment Guide

Senior operating-model work explains the drivers, cash conversion, and what breaks first.

Use source hierarchy: company-reported and user-provided facts first, management guidance and connected sources next, public filings/web-verified data next, analyst/benchmark assumptions after that, placeholders only for screen-grade builds.

Challenge revenue against market growth, share, price/volume, pipeline, churn, utilization, and capacity. Challenge gross margin and opex against mix, labor, input costs, pricing, fixed-cost leverage, and known initiatives.

Working capital must match the business model and growth path. Capex and D&A should reflect maintenance vs growth investment. Debt, interest, and liquidity should show whether cash sweep, amortization, revolver capacity, and minimum cash are credible.

Base case should be supportable, downside should pressure multiple linked drivers, and upside should explain execution requirements. Red flags include growth without reinvestment, margin expansion without operating support, balance sheet breaks, and EBITDA that does not convert to cash.