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Module05 - Module 5 Reporting and Analyzing Operating...

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1 Module 5 Reporting and Analyzing Operating Income Roadmap Purpose of Income Statement The need for Classification Revenue Recognition Issues Expense Matching Research and development Conundrum Restructuring Charges and Big Bath Tax Expense Below the Line Items Earnings per Share Transitory Income Items & Core Earnings Estimation of stock prices entails forecasts of future earnings and cash flows. Core earnings and cash flows have the greatest persistence or predictive power and are, therefore, most useful for stock price estimation. Our goal is to identify core earnings and cash flows of the company.
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2 Classification of Income Statement Items Non-operating Operating Non-recurring Recurrent Operating and Nonoperating Items in the Income Statement Home Depot’s Operating Items
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