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Based on the Finical accounting theory( William R. Scott)Ch1-CH5 Please explain Burberry Ltd. is a large retail company listed on a major stock exchange, and
Based on the Finical accounting theory( William R. Scott)Ch1-CH5
Please explain
Burberry Ltd. is a large retail company listed on a major stock exchange, and its reported net income for the year ended December 31, 2020, is $6 million. The earnings were announced to the public on February 4, 2021. Financial analysts had predicted the company's net income for 2020 to be $8 million and these analysts did not revise their prediction prior to release of the earnings on February 4, 2021 Assumptions: No other news about Burberry Ltd. was released to the public on February 4, 2021. No significant economy wide events affecting share prices occurred on February 4, 2021. In addition to the information noted in the introduction to PART D, consider the two situations: i. The deviation of forecasted earnings from actual earnings of $2 million is completely accounted for by the closing down of a number of its retail outlets. ii. The deviation of forecasted earnings from actual earnings of $2 million is completely accounted for by a fire in Burberry Ltd.'s largest retail outlet, which had caused the outlet to be closed temporarily for six months. In which of these two scenarios would you expect the price change of Burberry Ltd.'s common stock to be greater and why? Neither i or ii, there will be no change in price of common stock i, because the deviation is expected to impact future earnings ii, because the deviation was unexpected and not included in analysts estimatesStep by Step Solution
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