Finance and Accounting financial statements and data analysis
1. Calculate Thomas Cook’s abnormal trading volumes for -5 days to +5days around both profits warning s (28th September 2010 and 12th July 2011), taking the average trading volumes before both events from -260 days to -10 days.
2. Calculate the daily cumulative abnormal returns for Thomas Cook for -5 trading days to +20 days around both profit warnings (28th September 2010 and 12th July 2011) using CAPM, where Beta is calculated using data for -90 to -10 trading days prior to the each of the events.
3. Compare and contrast both of the profit warnings effects on the trading volumes and the share price. With reference to any differences in the severity of the effects.
4. Critically discuss the results that you found and how they related to current literature on profit warnings. (hint you should relate your discussion to events that happened within the company i.e. change of CEO, share issue, debt increases)
Relevant materials on share price, share volume, Risk rates, and profit warnings are available on moodle.
Section B (20%)
In no more 400 words, explain with examples the motivations behind Earnings management and creative accounting.
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