If a company’s value is not driven by its short-term earnings, why do investors spend so much time analyzing a company’s annual or even quarterly earnings announcements?
Answer to relevant QuestionsWhat risk does a company run once it starts to manage its earnings to meet analysts’ targets year after year? Under what conditions might the stock market fail to reflect economic fundamentals? What are the key strategic and tactical opportunities for an industrial company in case of general stock market overvaluation (and undervaluation)? What is typically preventing companies from capturing such opportunities? Assuming that fundamental investors ultimately set a company’s share price, name two reasons why you could still expect the price to show significant volatility. Compare and contrast the value driver approach to performance measurement with the balanced scorecard approach.
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