Lin hands a friend her research notes: “Revenue is growing, industry demand looks good, valuation is reasonable, and I like the long term.” Her friend asks one question: “What new information would change your mind?” Lin searches more than ten pages and finds no direct answer.
Finishing the document did not finish defining the judgment. A report should explain what you know, believe, and still lack, plus what you will do next. Someone else should be able to challenge the reasoning, and your future self should be able to recover its original basis.
What you will be able to complete
- Separate facts, interpretations, forecasts, and actions in a dated research summary.
- Support a judgment with key evidence and conditional valuation, including a counterargument capable of changing it.
- Produce a T04 report and evidence index with conditions for watching, researching further, or abandoning the hypothesis.
This chapter consolidates earlier analysis. A template cannot replace it. Mark unfinished work as missing instead of asking AI to fill the sections of an apparently complete formal report.
Start with today's question
Identify the security, research date, scope, and version at the beginning. If the question is whether a company deserves more investigation, the conclusion should address research effort. If you evaluate an investment hypothesis, state the price and evidence conditions. Do not quietly convert learning about the business into proving that it deserves a purchase.
CFA Institute's research-report guide discusses business, industry, valuation, finances, and risks while noting that no single industry format exists. [1] T04 adapts those analyses by adding counterevidence, constraints, and review conditions. Observation or nonparticipation can be valid conclusions. The exercise does not require every learner to issue a trading rating or target price.
An information cutoff needs substance. C1's original observation dates are December 31, 2024, and April 30, 2025. C1-R labels retrospective reading; it does not determine whether a document fits a date. Check each publication time. Costco's fiscal-2025 10-K came after both original cutoffs and cannot enter an earlier report. If date-appropriate collection is incomplete, state that instead of merely printing a date on the cover.
Give the summary a checkable first sentence
Use Shanlan Consumables, an independent fictional company. Its documents, figures, and prices are synthetic, not Costco, Target, or C1 facts. The research date is October 29, 2026, using only the supplied annual figures. Amounts are in millions of U.S. dollars, with ten million unchanged common shares, one share class, and no other dilutive instruments.
Previous-year revenue was 90 and common-shareholder net income 9. Current-year revenue is 100, net income 8, operating cash flow 5, and cash spent on fixed assets 4. The teaching share price is $12. We lack a sufficient explanation of the profit-to-cash difference and have not completed governance or financing-constraint checks.
Revenue grew approximately 11.11%, while net income fell approximately 11.11%. Net margin declined from 10% to 8%. “Revenue and profitability strengthened together” therefore combines a correct growth observation with an unsupported interpretation. A polished sentence cannot remove the conflict in the figures.
A more useful opening is: “Within the supplied information, revenue increased while margins fell. Operating cash of 5 is below profit of 8, with the cause unresolved. Investigate the cash bridge and margin change before reaching a purchase conclusion.” It provides a next step instead of an impressive upside claim.
CFA Institute's communication standard emphasizes distinguishing fact from opinion and not presenting model estimates as certain future outcomes. [2] We borrow that checkable-expression principle without claiming that a personal teaching template is an institutional compliance report.
Three claims are easier to inspect than thirty charts
The first claim is revenue growth. Link the evidence index to the supplied 90 and 100, retaining periods and units so another person can reconstruct the 11.11%. “Stronger demand” requires additional volume, price, and customer-scope evidence. The growth calculation has not identified its cause.
The second claim is that the cause of margin decline remains unresolved. Materials, product mix, competition, unusual expenses, or other factors might contribute. The report need not choose prematurely, but should identify the most consequential explanation, the required material, and evidence that would change your view.
The third is the cash question. Operating cash of 5 is 3 below net income of 8. Separately, subtracting capital expenditure of 4 from operating cash leaves a simplified teaching balance of 1. Label it a simplified balance rather than a fully reconciled free-cash-flow measure.
Capital expenditure of 4 does not automatically explain the operating-cash shortfall of 3. It is a separate investing outflow in these inputs. Investigate working capital and noncash adjustments for the profit-to-operating-cash bridge, then examine capital requirements separately. Putting the question in the correct statement location is progress, even before its cause has been established.
Each core claim needs its basis, interpretation, alternative causes, and missing material. An index can organize locations; the prose should explain the reasoning. A pile of documents should not require the reader to discover the report's most important conclusion on the author's behalf.
Put valuation inside its conditions
Given earnings of $8 million and ten million shares, earnings per share are $0.80. At $12, historical P/E is 15. This ratio alone establishes neither a reasonable price nor undervaluation. Peer comparisons and normalized earnings remain unexamined, so those labels would go beyond the available analysis.
For an illustration of uncertainty in T04, add three explicitly supplied scenarios. Margins and multiples are teaching assumptions, not estimates from actual peers. Amounts remain millions of dollars.
| Scenario | Revenue | Attributable net margin | Net income | Assumed P/E | Per-share estimate |
|---|---|---|---|---|---|
| Adverse | 90 | 5% | 4.5 | 12 | $5.40 |
| Middle | 100 | 8% | 8 | 15 | $12.00 |
| Favorable | 110 | 10% | 11 | 18 | $19.80 |
Compute profit first, multiply by the relevant P/E, then divide the dollar equity value by ten million shares. The middle case matching today's teaching price does not establish market consensus. The favorable case is not a guaranteed target. A model can match a number without revealing what every investor expects.
Reinvestment, cash needs, debt, and governance are still insufficiently examined. Put those limitations beside the table, rather than announce enormous opportunity and rely on a final disclaimer. The conditional result and its untested support should be visible together.
Three scenarios do not generate their own probabilities. Without a basis, do not calculate a probability-weighted target. Identify business evidence that would strengthen a scenario or invalidate its application. The table organizes investigation rather than votes on which future must occur.
A counterargument should reach the central hypothesis
“Markets may fluctuate” is unlikely to overturn a specific thesis. A stronger challenge for Shanlan is: “Revenue growth may involve worse collection terms. If the added revenue is not recoverable as cash, the margin-recovery and funding assumptions could both be too optimistic.” That directly identifies evidence capable of altering the report.
It remains a hypothesis, not a diagnosis of financial misconduct. Obtain receivables, credit terms, collections, and doubtful-account information. A verified reversible settlement-timing effect could ease the concern; persistent structural cash absorption could require changed scenarios. Do not keep extending the observation period to avoid reconsidering the premise.
Another challenge concerns the unsupported 15-to-18 multiple range even if margins recover. Calling the increase an industry rerating supplies no new evidence. A counterargument should target assumptions that materially affect the outcome, rather than merely complete a list of generic risk names.
A person outside the first draft can bring a different perspective. If only you and AI inspect it, label self-checking or AI-assisted challenge honestly rather than independent human review. Preserve the strongest argument against the view, its evidence, the author's response, and unresolved disagreements.
Let the conclusion select a next action
Under the limited materials, the example report chooses further research. Allocate two hours to the cash/receivables explanation, margin breakdown, debt, and governance constraints. Review by November 30, 2026, or when a significant announcement appears. The dates and budget are specific teaching arrangements.
If required evidence remains unavailable, pause further research commitment and retain a watch-list record. If the evidence removes the premise's support, identify exactly which hypothesis you abandon. Pausing research does not establish a bad business, and an unresolved price does not mean an opportunity can never exist.
Portfolio action belongs in a separate entry. Existing industry exposure, forthcoming payments, liquidity, and capacity for losses need the funding and risk work. A report can explain adding zero without using one valuation table to set a universal allocation for all readers.
CFA Institute's diligence standard stresses an appropriate research basis while acknowledging that even well-informed recommendations retain downside risk and depend on information available at the decision time. [3] A report produces a supported, revisable judgment rather than a guarantee about outcomes.
Review a report before writing your own
Explain why “historical P/E of 15 and middle valuation of $12” does not establish an appropriate purchase price. Then diagnose this sentence: “Operating cash is 3 below profit because equipment cost 4.” Use the exercise's cash classifications. Write your reasoning before checking the answer.
The first needs earnings assumptions, multiple support, comparability, and unresolved risks. Matching the current price does not prove consensus. The second mixes the operating-cash reconciliation with a separately classified investing outflow. Investigate the operating bridge before considering equipment funding; figures in two different statement locations cannot simply explain each other.
Update with apparently better cash evidence
A later independent synthetic quarter reports net income of 8 and operating cash of 9. A decline in receivables adds 4 to operating cash; other adjustments have a combined negative effect of 3. Someone deletes the cash concern and immediately restores the favorable scenario. What should your update say?
Record the quarter's cash improvement and receivables release first. Then check sustainability and comparability with the original annual question. Without the supplied positive 4 contribution, operating cash would be 5. The fact that 9 exceeds 8 does not alone establish stronger long-term cash generation.
Do not multiply the quarter's 9 by four or treat collecting earlier receivables as proof of new sales demand. Evidence can ease one near-term concern while leaving margins, financing, and valuation unresolved. The task is identifying which part changed, not forcing the entire conclusion to reverse.
Complete a T04 report
Choose one designated C1 observation date or use Shanlan's synthetic materials. Begin with the question, security, applicable date, status, and largest unknown. Connect business, industry, financial, governance, valuation, scenario, and counterevidence work. Missing material stays pending; a filled template is not evidence that every investigation happened.
Attach the evidence index, data processing or calculations, and a counterargument with a response. Specify conditions for watching, further research, or abandonment. Add pending funding-constraint checks, the next review, a version, and a change history. For C1-R, assess each actual publication date: Target's fiscal-2024 10-K was filed March 12, 2025, so it can enter T2 but not T1. Later material becomes a subsequent observation rather than retroactive evidence.
Ask a reader to trace a core conclusion from summary to source and calculation, then introduce a new condition and identify the section it changes. If the reader can only repeat “positive for the long term,” strengthen the support relationships and stopping rules. Keep the first version so later revisions have a real reference.
Write a judgment that can be challenged and updated
Fix the date and material scope, then distinguish facts, interpretations, forecasts, and actions. Core conclusions should trace to sources and calculations, with valuation assumptions and major unknowns in view.
Challenge the central premise with the strongest counterargument and turn the result into a concrete next step. A report need not end with a trade. It should explain why you watch, investigate, or stop, and what evidence would change that choice.
References
- CFA Institute: Equity Research Report Essentials. Report content and the absence of a single format. T04 is a personal learning adaptation, without mandatory ratings or targets.
- CFA Institute: Standard V(B)—Communication with Clients and Prospective Clients. Fact, opinion, and model limitations. Its professional obligations apply to members and candidates; this chapter adapts communication principles without assigning readers that identity.
- CFA Institute: Standard V(A)—Diligence and Reasonable Basis. Research basis, information availability, and continuing downside risk. Sources checked October 30, 2026.
AI assisted with writing and checks; independent AI full-text and bilingual review is complete; human financial review and target-reader testing remain pending. Shanlan and all operating, price, valuation, and update figures are synthetic teaching inputs.