As indicated by examples in this chapter, 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

Question: As indicated by examples in this chapter, earnings announcements by companies are closely followed by, and frequently result in, share price revisions. Two issues should

As indicated by examples in this chapter, 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 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?

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