Question
Understanding Earnings per Share and Stock Prices. The Following is an excerpt from an earnings release of Apple Inc., the maker of iMac, iPod, iPad
Understanding Earnings per Share and Stock Prices.
The Following is an excerpt from an earnings release of Apple Inc., the maker of iMac, iPod, iPad and iPhone products, related to the results of its operations for the first quarter of fiscal year 2016.
CUPERTINO, California January 26, 2016 Apple today announced financial results for its fiscal 2016 first quarter ended December 26, 2015. The Company posted record quarterly revenue of $75.9 billion and record quarterly net income of $18.4 billion, or $3.28 per diluted share. These results compare to revenue of $74.6 billion and net income of $18 billion, or $3.06 per diluted share, in the year-ago quarter. Gross margin was 40.1 percent compared to 39.9 percent in the year-ago quarter. International sales accounted for 66 percent of the quarters revenue.
Despite the increase in Apple's revenues and earnings over the same quarter of the prevoiusyear, its shares fell from US$97.34 on January 29, 2016, to US$96.43 on February 1, 2016.
Required:
Explain why the price per share decreased even though the company announced an increase in its earnings per share.
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