The recent financial collapse has led to considerable concern about the information provided to potential investors. The government and many researchers have pointed out the need for increased regulation of financial offerings. The study in this exercise concerns the effect of sales forecasts on initial public offerings. Initial public offerings' prospectuses were examined. In a random sample of 70 prospectuses in which sales forecasts were disclosed, the mean debt-to-equity ratio prior to the offering issue was 3.97, and the sample standard deviation was 6.14. For an independent random sample of 51 prospectuses in which sales earnings forecasts were not disclosed, the mean debt-to-equity ratio was 2.86, and the sample standard deviation was 4.29. Test, against a two-sided alternative, the null hypothesis that population mean debt-to-equity ratios are the same for disclosers and nondisclosers of earnings forecasts.
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