Question

Do competitive advantage and the forecast period necessarily end at the same time? Explain.

Answer 1

Competitive advantage & forecast period don't need to go hand in hand. Competitive advantage means the upper hand the business has over it competitors due to the availability of some USP over any facet of business. The basically have a superior business position in the market and among the customers.

Forecast period on the other hand is that period in which the assumed cash flows are calculated and used for specific purpose like valuation or growth. Its that period up to which an org can comfortably and almost accurately assess its projects cash inflow and outflow.

They don't need to be interdependent even when the advantage in the market ends that may mark the end of growth/stable phase of the org but that would not mean its cash flows cant be projected. The firm might have entered in the declining or fade stage and still the org will know the data on its declining cash flows.

And likewise when forecast ends that may not mean that advantageous position in the market has been vanquished it may mean that forecasting beyond a point is not healthy for any financial calculation.