1Module 5Reporting and Analyzing Operating IncomeRoadmapPurpose of Income StatementThe need for ClassificationRevenue Recognition IssuesExpense MatchingResearch and development ConundrumRestructuring Charges and Big BathTax ExpenseBelow the Line ItemsEarnings per ShareTransitory Income Items & Core EarningsEstimation 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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