{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Investor Insight - Motorola had “special” charges in 14...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Investor Insight Steven Bronstein/The Image Bank/Getty Images. Many companies incur restructuring charges as they attempt to reduce costs. They often label these  items in the income statement as “non-recurring” charges, to suggest that they are isolated events,  unlikely to occur in future periods. The question for analysts is, are these costs really one-time, “non- recurring events,” or do they reflect problems that the company will be facing for many periods in the  future? If they are one-time events, then they can be largely ignored when trying to predict future  earnings. But some companies report “one-time” restructuring charges over and over again. For example,  Procter and Gamble Co.  reported a restructuring charge in 12 consecutive quarters, and 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Motorola had “special” charges in 14 consecutive quarters. On the other hand, other companies have a restructuring charge only once in a five- or ten-year period. There appears to be no substitute for careful analysis of the numbers that comprise net income. If a company takes a large restructuring charge, what is the effect on the company's current income statements versus future ones? Answer: The current period's net income can be greatly diminished by a large restructuring charge. The net incomes in future periods can be enhanced because they are relieved of costs (i.e., depreciation and labor expenses) that would have been charged to them....
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online