Suppose a company announces a profit increase in August 2022 of $2,000,000 over last year, but in October 2022 announces that the correct profit change was a $500,000 increase over last year, due to the auditors discovering errors in the August profit calculation. Upon announcement of the $2,000,000 increase in August the share price of the company increases by 20% to $60. When the revision of the profit occurs in October, the share price falls to $40. Assume no change in the stock market between August and October. Does that mean that the price in August was wrong? Explain.

Answer rating: 100% (QA)

Yes the initial stock price increase based on the announced 2 ... View the full answer