Chapter 13 Notes

Chapter 13 Notes - Chapter 13 Financial Analysis: The Big...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 13 Financial Analysis: The Big Picture Sustainable Income. . . o Is the most likely level of income to be obtained in the future o Does not include irregular revenues, expenses, gains, or losses Components of the Income Statement Irregular Items o Two types of irregular items are reported – (all net of taxes) o Discontinued operations o Extraordinary items Discontinued Operations . . . o Refers to the disposal of a significant segment of a business . . . o The elimination of a major class of costumers or o An entire activity Rozek net income of $800,000 from continuing operations in 2007. During 2007 the company discontinued and sold its unprofitable chemical division. The loss in 2007 from chemical operations (net of $90,000 taxes) was $210,000. The tax rate is 30%. Extraordinary Items . . . o In 20047 a revolutionary foreign government expropriated property held as an investment by Rozek Inc. o The loss is $70,000 before applicable income taxes of $21,000, the income statement presentation will show a deduction of $49,000 Presentations of Extraordinary Items . . .
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Estimating Sustainable Income o When evaluating a company, it generally makes sense to eliminate all irregular items in estimating future sustainable income Change in Accounting Principle o Occur when the principle used in the current year is different from the one used in the preceding year o Is permitted, when o Management can show that the new principle is preferable to the old and o Most changes are reported retroactively – improves comparability o Example: a change in inventory costing methods (such as FIFO to average cost)
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/17/2008 for the course MGMT 30A taught by Professor Tian during the Winter '08 term at UC Irvine.

Page1 / 7

Chapter 13 Notes - Chapter 13 Financial Analysis: The Big...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online