HomeworkLib
Question

Earnings announcements by companies are closely followed by, and frequently result in, share price revisions. This...

Earnings announcements by companies are closely followed by, and frequently result in, share price revisions. This raises two issues. First, earnings announcements are “ history” – that is, they reflect information on a past period. If the market values stocks based on expectations of the future, why are numbers summarizing past performance relevant? Second, these announcements revolve around accounting earnings. Going back to Chapter 2, we learned that such earnings may have little to do with cash flow. So, again, why are earnings announcements relevant?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Earnings announcements are very critical part of market valuation. Earning data has all information pertaining to recent revenue, sales, profit and costs of sales. All these information are used to forecast about future cash flow and growth rates.

It means , unexpectedly low profit may reduce the estimates of future cash flow and growth rates; so drop in price as the result. The reverse may correct for the high past data.

0 0
Add a comment
Know the answer?
Add Answer to:
Earnings announcements by companies are closely followed by, and frequently result in, share price revisions. This...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Earnings announcements by companies are closely followed by, and frequently result in, share price revisions. Two...

    Earnings announcements by companies are closely followed by, and frequently result in, share price revisions. Two issues should come to mind. First, earnings announcements concern past periods, If the market values stocks based on expectations of the future, why are numbers summarizing past performance relevant? Second, these announcements concern accounting earnings. Such earnings may have little to do with cash flow - so, again, why are they relevant? PLEASE PROVIDE REFERENES

  • My question is Q 6, diversification. thank you Chapter 13 Retum, Risk and the Security Market...

    My question is Q 6, diversification. thank you Chapter 13 Retum, Risk and the Security Market Line 5. Expected Portfoli d. The directors of Big Widget die in a plane crash. Congress approves changes to the tax code that will increase the top marginal corporate tax rate. The legisla orate tax rate. The legislation had been debated for the previous six months. ed Portfolio Returns (LO1] If a portfolio has a positive investment in every at can the expected return...

  • my qustion is Q 8, beta and capm thank you ! Chapter 13 Retum, Risk, and...

    my qustion is Q 8, beta and capm thank you ! Chapter 13 Retum, Risk, and the Security Market Line 5. Expected Portfolio B asset, can the expect the portfolio? Can it be less yes to one or both of d. The directors of Big Widget die in a plane crash. Congress approves changes to the tax code that will increase the top marginal perte tax rate. The legislation had been debated for the previous six months. ted Portfolio Returns...

  • Moore Plumbing Supply Company Capital Structure             Mort Moore founded Moore Plumbing Supply after returning from...

    Moore Plumbing Supply Company Capital Structure             Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World War II. Before joining the armed forces, he had worked for a locally owned plumbing company and wanted to continue with that type of work once the war effort was over. Shortly after returning to his hometown of Minneapolis, Minnesota, he became aware of an unprecedented construction boom. Returning soldiers needed new housing as they started families...

  • Moore Plumbing Supply Company Capital Structure Mort Moore founded Moore Plumbing Supply after returning from duty...

    Moore Plumbing Supply Company Capital Structure Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World War II. Before joining the armed forces, he had worked for a locally owned plumbing company and wanted to continue with that type of work once the war effort was over. Shortly after returning to his hometown of Minneapolis, Minnesota, he became aware of an unprecedented construction boom. Returning soldiers needed new housing as they started families and...

  • Moore Plumbing Supply Company Capital Structure Mort Moore founded Moore Plumbing Supply after returning from duty...

    Moore Plumbing Supply Company Capital Structure Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World War II. Before joining the armed forces, he had worked for a locally owned plumbing company and wanted to continue with that type of work once the war effort was over. Shortly after returning to his hometown of Minneapolis, Minnesota, he became aware of an unprecedented construction boom. Returning soldiers needed new housing as they started families and...

  • Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World...

    Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World War II. Before joining the armed forces, he had worked for a locally owned plumbing company and wanted to continue with that type of work once the war effort was over. Shortly after returning to his hometown of Minneapolis, Minnesota, he became aware of an unprecedented construction boom. Returning soldiers needed new housing as they started families and readjusted to civilian life. Mort felt...

  • Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World...

    Mort Moore founded Moore Plumbing Supply after returning from duty in the South Pacific during World War II. Before joining the armed forces, he had worked for a locally owned plumbing company and wanted to continue with that type of work once the war effort was over. Shortly after returning to his hometown of Minneapolis, Minnesota, he became aware of an unprecedented construction boom. Returning soldiersneeded new housing as they started families and readjusted to civilian life. Mort felt that...

  • Read the attached article. Do you feel one style of banking control is more stable than...

    Read the attached article. Do you feel one style of banking control is more stable than the other? Why? Does one banking method minimize market volatility and risk better or is it just packaged differently? Do you feel the US (Western) Banking system can better control the patterns of behavior going forward that have caused economic damage in the past? Should the Fed continue its stimulus policy, reduce it or abandon it entirely (Google some recent articles to research this)?  (Please...

  • What should be the elements of a healthy ethics policy? What, if any, of these elements...

    What should be the elements of a healthy ethics policy? What, if any, of these elements are missing at Amazon? Provide a detailed evaluation that demonstrates clear, insightful critical thinking. Evaluate Amazon’s efforts to root out corruption. What other steps, if any, do you recommend the organization should take? Provide a detailed evaluation that demonstrates clear, insightful critical thinking. How can Amazon move beyond compliance to develop a healthy ethical climate? Provide a detailed evaluation that demonstrates clear, insightful critical...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT