Examples of events that would cause a security analyst to normalize a company's earnings are all...

Examples of events that would cause a security analyst to normalize a company's earnings are all the following except:

A. A legal settlement.

B. The closing of a plant.

C. A labor strike.

D. A change of chief executive officer.

Expert Solution

Normalize a companies earnings :
It means remove the effects of one-time events or unusual events from the companies earnings.
Normalizing the companies earning help to present real picture of companies	earnings and its operation.

Many companies are incur different types of one-time gain or loss,
such as legal compensation paid or legal compensation received.
In both of these examples company receive real cash and it affects the financial
position of the company, but still they are not provide companies real operational performance
and hence it should be required that analyst must remove the effects of such transaction and
normalized the earnings.

Legal settlement - It is one time event and so companies earning must be adjusted for such event.
Closing of a plant - It is also non-recurring or extraordinary events and earning should be normalized
for such events.
Labor Strike - Loss arises due to labor strike must be adjusted to see the real picture of
companies earning, so it is also an example of events that require normalize
companies earning.
Change of Chief Executive Officer - It is not a such event which require normalization of earnings.
Change in CEO are not affect the companies normal operation. It not caused
to security analyst to normalized the companies earnings..
Option : D A change of Chief Executive Officer.

jeff jeffy answered 1 year ago

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