How can proforma earnings statements be effectively used in a company's news release?

Proforma earnings statements can be effectively used in a company's news release by prominently displaying them in the headline or first paragraph. Research shows that this has a much stronger impact on stock prices than proforma earnings reported elsewhere in the document.

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In his article for Harvard Business Review, Baruch Lev – the Philip Bardes Professor of Accounting and Finance at the Stern School of Business in NYU, talks about proforma as one of the ways in which managers can impart useful information to investors. (For more like this, check out our book summary). Lev stresses that "research shows that proforma earnings statements prominently displayed in the headline or first paragraph of a company's news release have a much stronger impact on stock prices than proforma earnings reported elsewhere in the document."

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