Manulife Financial is a large Canadian- based insurance and financial services company, with operations in Canada, United
Question:
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a. Manulife management claims that their persistent earnings calculation gives a better picture of longer- term earnings. Do you agree? Explain.
b. Which earnings measure€” IFRS or persistent earnings€” best helps investors to predict Manulife€™s future earnings performance? Explain.
c. The Conceptual Framework includes reporting on manager stewardship as a goal of financial reporting. Which measure best reports on manager stewardship? Explain.
d. On November 8, 2012, the day of Manulife€™s earnings release, the company€™s share price fell 18 cents to $ 11.82,On the same day, the S& P/ TSX Composite Index fell to 12,197.05, from its open at 12,227.85. Manulife€™s beta, per Reuters Finance at the time, was 1.48. Assume that the daily risk- free interest rate was effectively zero. Assume securities markets efficiency. Also assume that no other significant firm-specific information about Manulife became available on November 8. As evidenced by its share price performance, did the market approve or disapprove of Manulife€™s calculation of persistent earnings? Explain, and showcalculations.
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