Best buy Inc shares hit a new record on Tuesday after it reported better-than-expected quarterly profit,...

Best buy Inc shares hit a new record on Tuesday after it reported better-than-expected quarterly profit, fueled by the growth of higher-margin businesses during the fiercely competitive holiday quarter.

Why did the stock market respond this way? Is this consistent with the predictions of the Efficient Market Hypothesis? Why or Why not?

Solutions

Expert Solution

Stock market respond this way because investors sometimes value a company based on expectations about profits. If actual profit turns out be more than expected, share price will rise. Growth of high margin businesses also indicates that company is going to do good business and profits in upcoming future which also boosts market sentiments and increase the share price.

It is not consistent with the predictions of efficienct market hypothesis beacuse the hypothesis states that share prices reflect all the information and it is impossible to purchase undervalued and overvalued stocks. But in this case, company's stock price is rising due to better future expectations not solely by its past performance. Moreover, stock bubble and information bias can also increase the stock price in contrast to efficient market hypothesis.

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

Best buy Inc shares hit a new record on Tuesday after it reported better-than-expected quarterly profit,...

Best buy Inc shares hit a new record on Tuesday after it reported better-than-expected quarterly profit, fueled by the growth of higher-margin businesses during the fiercely competitive holiday quarter. Why did the stock market respond this way? Is this consistent with the predictions of the Efficient Market Hypothesis? Why or Why not?

The 2018 annual report of Best Buy Co., Inc., reported profitable operations for the

The 2018 annual report of Best Buy Co., Inc., reported profitable operations for the most recent six years. However, the company suffered a net loss in 2012. Best Buy reported the following for the twelve months ended March 3, 2012: The calculation of diluted earnings per share assumes the conversion of the company’s previously outstanding convertible debentures due in 2027 into 8.8 million shares common stock . . . and adds back the related aftertax interest expense of $1.5. ....

Best Buy Co Inc. reported the following financial information in a recent financial statement ($ millions)....

Best Buy Co Inc. reported the following financial information in a recent financial statement ($ millions). Based on the information below, compute the additional working capital financing period. Sales …………………………………$50,272 Cost of sales …………………………………37,611 Inventory …………………………………5,897 Accounts receivable …………………………………2,348 Accounts payable …………………………………4,894 La Verne Company reports the sales and collection information below. Assume La Verne Company collects 20 percent of its sales in the month of the sale, 50 percent the next month, 25 percent the following month, and 5...

A large loss occurred in 2019 at Hororata Inc in Canterbury, rather than the expected profit....

A large loss occurred in 2019 at Hororata Inc in Canterbury, rather than the expected profit. As a result, its stakeholders are concerned about the firm’s performance. You are hired as the new Chief Financial Officer and are given the task of getting the company back into a sound financial position. Hororata’s 2018 and 2019 balance sheets and income statements, together with projections for 2020, are shown in the following tables. The tables also show the 2018 and 2019 financial...

Best Snow Removal (BSR) inc. would like to buy a new truck for $80,000. It is...

Best Snow Removal (BSR) inc. would like to buy a new truck for $80,000. It is expected that the truck will generate a pre-tax NET revenue of $30,000 per year. The economic life of the truck is 5 years and it belongs to UCC class 10 (30% CCA). The initial NWC INCREASES by $4,000 and it INCREASES by an ADDITIONAL $2,000 at the BEGINNING of year 3 (i.e. at time t = 2). BSR plans to sell the truck at...

11) Cellular Access? Inc., is a cellular telephone service provider that reported net operating profit after...

11) Cellular Access? Inc., is a cellular telephone service provider that reported net operating profit after tax? (NOPAT) of $241 million for the most recent fiscal year. The firm had depreciation expenses of $102 million, capital expenditures of $220 million, and no interest expenses. Working capital increased by $13 million. Calculate the free cash flow for Cellular Access for the most recent fiscal year. The free cash flow is $ --- million. ? (Round to the nearest? integer.) 12) A...

1....AJ's Better Golf, Inc. wants to borrow $125,000 to buy a new piece of manufacturing equipment....

1....AJ's Better Golf, Inc. wants to borrow $125,000 to buy a new piece of manufacturing equipment. The interest rate on the loan is 10% and the loan is for 15 years. Loan payments are to be made semi-annually. How much are the semi-annual payments? Select one: A. $8,131 B. $9,250 C. $13,260 D. $17,383 The treasurer of DEF Imports expects to invest $280,000 of the firm's funds in a long-term investment vehicle at the beginning of each year for the...

Subjects