Reimersppt_ch12 - Chapter 12 Using Financial Statement...

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Unformatted text preview: Chapter 12 Using Financial Statement Analysis to Evaluate a Firms Performance In Chapter 11 You learned how to: o Prepare a Statement of Cash Flows. o from an Income Statement, o and a comparative Balance Sheet In Chapter 12 You will learn how to use the financial statements to evaluate the financial position of the company. Analysis techniques include: o Vertical Analysis o Horizontal Analysis o and Ratio Analysis Lets take a closer look at the Income Statement The Income Statement is used as a predictor of future earnings. As such, the Financial Accounting Standards Board (FASB), requires certain components of income to be reported separately , as they are not expected to recur. The following items must be reported separately on the Income Statement: Discontinued Operations Once a firm decides to discontinue a division , its operating results and the financial impact of the sale must be segregated from income that is expected to continue. Reporting Discontinued Operations Example: Expected To Continue Not Expected To Continue Reporting Discontinued Operations Results of Continuing Operations are presented in Before-Tax Dollars The Income Tax Expense on Income from Continuing Operations is presented separately Income from Continuing Operations, in after-tax dollars, is the amount that can be expected to recur. There are two income statement components for Discontinued Operations: Income from Operation of the Discontinued Segment is presented net of taxes....
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Reimersppt_ch12 - Chapter 12 Using Financial Statement...

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