Question

Consider this statement: “To calculate the SUE, we start with unexpected earnings, which is the reported...

Consider this statement:

“To calculate the SUE, we start with unexpected earnings, which is the reported earnings minus the expected or forecasted earnings. We then calculate the standard deviation of unexpected earnings for several recent quarters, such as for the last 20 quarters. SUE is then the ratio of unexpected earnings to the standard deviation of unexpected earnings.”

Is this statement correct?

Yes

No
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Homework Answers

Answer #1

YES

The above given statement is correct.

Standardized unexpected earnings or SUE is the common method used for calculating the unexpected earnings. Unexpected earnings is the difference between actual earnings and expected earnings in a span of time.

The formula of SUE is

SUE = ( EPS(Q1) - fEPS(Q1) ) / SD(Q1)

EPS(Q1) is the earnings per share in a given quarter and fEPS(Q1) is forecasted earnings. So when we deduct these earnings from forecasted earnings the we will get unexpected earnings. The we are calculating the ratio of unexpected earnings to its standard deviation. It will gives standardized unexpected ernings.

So the given statement is correct.

ThankYou....

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