Scroll Top

search-icon
    drop-arrow

    Guidance

    Introduction

    The guidance refers to analytical data that firms share with their investors (stockholders). This is done to keep them informed about the predicted performance in the coming days.

    Guidance is also referred to as 'forward-looking statements' and 'earnings guidance'. It generally covers the estimation of revenues, estimation of capital spending, and expected earnings.

    Understanding Guidance

    There are no hard and fast rules that bond companies must hand out earning guidance. However, it is considered a good practice and most companies provide their investors with this information. Generally, the company's quarterly earnings report is accompanied by earnings guidance and is analysed in-depth in the board meetings of most companies.

    The data given by earnings guidance reports are usually based on the market conditions, sales projection, and company spendings. Nevertheless, earnings reports are not just restricted to that as many companies cover other financial aspects, such as cash flow, units sold, inventory, cost of expansion, acquisition, additional revenue in any form, and tax refunds.

    How Guidance Influence Investors?

    Earnings guidance can effectively influence the rating of stocks given by analysts. This will, in turn, have a more significant impact on investors when they decide to either sell, hold, or purchase a particular security.

    For instance, if a firm's management gives out guidance data that are not up to the market expectations and conditions, then analysts will go on to give a lower rating to that stock and the investors may be influenced to give up on their position.

    Disadvantages of Guidance

    Earnings guidance reports can sometimes be incorrect, and this can adversely impact the growth of the company as investors may decide to exit the company's holdings fearing adverse outcomes in the future.

    Recently, Warren Buffet asked companies to end their practice of handing out earnings guidance reports as it leads to firms giving too much emphasis on 'making the numbers' by ignoring their long-term objective of growth and expansion.

    Index

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use

    ISO

    ISO 27001

    Data Center

    SSL

    SSL Certified Site

    128-bit encryption