In an official announcement to the stock market, ABC Ltd noted that the corporation expects its "underlying profit before tax" to fall below the range previously forecasted and announced to the equity market. Please read below: "ABC Ltd on Wednesday said the subdued trading conditions had coincided with a period of "significant disruption" for the company including introducing a new wage model for its front-end sales staff, an ongoing review of its shop network and putting in new sales systems. ABC Ltd managing director said the overall results would be disappointing. Although the company's corporate results were strong especially in the United States, United Kingdom and Asia, the sluggish regional result means ABC Ltd now expects its underlying profit before tax for the 12 months to June 30 to fall to between $535 million and $560 million, below the $590 million to $620 million range it initially targeted. The mid-point in this new range, $547.5 million, represents a 10 per cent decrease on the record $584.7 million underlying profit before tax it recorded last year." The underlying profit metrics are different from the profit to be reported in the financial statements. Requirement: 3) As a user of the corporation's financial information (ABC Ltd), discuss the potential reaction toward such an announcement?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question

In an official announcement to the stock market, ABC Ltd noted that the corporation expects its "underlying
profit before tax" to fall below the range previously forecasted and announced to the equity market.
Please read below:
"ABC Ltd on Wednesday said the subdued trading conditions had coincided with a period of "significant
disruption" for the company including introducing a new wage model for its front-end sales staff, an ongoing
review of its shop network and putting in new sales systems. ABC Ltd managing director said the overall results
would be disappointing. Although the company's corporate results were strong especially in the United States,
United Kingdom and Asia, the sluggish regional result means ABC Ltd now expects its underlying profit before
tax for the 12 months to June 30 to fall to between $535 million and $560 million, below the $590 million to
$620 million range it initially targeted. The mid-point in this new range, $547.5 million, represents a 10 per
cent decrease on the record $584.7 million underlying profit before tax it recorded last year."
The underlying profit metrics are different from the profit to be reported in the financial statements.
Requirement:
3) As a user of the corporation's financial information (ABC Ltd), discuss the potential reaction
toward such an announcement?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education