As indicated by examples in this chapter, earnings announcements by companies are closely followed by, and frequently

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 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?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...