What is a potential reason for adjusting projections based on cyclical industries?

Adjusting projections based on cyclical industries is crucial for ensuring that cash flow predictions accurately reflect actual market conditions. Cyclical industries, such as manufacturing and construction, experience significant fluctuations in demand corresponding with economic cycles. This inherent variability necessitates adjustments to projections, as the standard growth rates or cash flow estimates may not account for potential downturns or peaks in the business cycle.

By considering these cyclical patterns, analysts can create more realistic and reliable financial models that capture the true potential of a business, accounting for both high and low demand periods. This ultimately leads to better investment decisions, as it reflects the operational reality of businesses operating in these sectors, promoting a more accurate assessment of their financial health and performance over time.