Page 187 - DCOM507_STOCK_MARKET_OPERATIONS

Stock Market Operations

Notes Beginning the discussion on the forecasting techniques, it will not be out of place to briefly
mention that the earnings per share are measured from the financial statement. This will provide
us an understanding of its changes. Broadly, changes in earnings are affected by operating and
financing decisions. Both these decisions are, however, interdependent. Various companies do
this by presenting the information in the income statement reflecting both types of decisions.
Given below is the format, which analyses:
Income Statement for the year ended………..

1. Sales revenue
2. Less interest expenses
3. Earnings Before Interest and Tax (EBIT)
4. Less Interest Expenses

5. Earnings Before Tax (EBT)
6. Number of shares outstanding
7. Earning After Tax (EAT)
8. Number of shares outstanding

9. EPS = EAT/number of shares outstanding

Task Discuss the Forecasting earning per share with examples.

Self Assessment

Fill in the blanks:

13. The most important and the principal is getting information about the earnings of the
company is its …………………………
14. The research study conducted by Niederhoffer and Regan found that the prices are strongly
dependent on the changes in the ………………..
15. Various methods employed to assess the future outlook of the revenue, expenses and the
earnings from given the economic and industry outlook can be broadly classified into two
categories, …………… and ……………………..

Case Study Beta Management Company

n early January 1991, Sarah Wolfe was in her office considering new goals and directions
for her company forth coming year. Ms. Wolfe was the founder and CEO of the Beta
IManagement Group, a small investment management company based in a Boston
suburb. She dealt with a growing number of high-net-worth individual clients and had
$25 million in assets under management. Beta’s investment success during the past year
had brought in a steady stream of new clients and additional money from existing clients.
At the same time, Ms. Wolfe had inquiries from some small institutions, and was hoping
to expand her business in 1991.
Contd...

182 LOVELY PROFESSIONAL UNIVERSITY