Professional Documents
Culture Documents
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Using base period CPI (1982-1984=100) (2007CPI/2006CPI) x 2006 Sales = Adjusted Sales (207.3/201.6) x $171,179 = $176,019 When adjusted for inflation, sales grew at a rate of 1.24%, which means that sales growth has kept pace with general inflation.
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Loss recognitions on write-downs of inventories If the value of inventory falls below its original cost, the inventory is written down to market value. Amount of the write-down will affect comparability and quality of profit margins.
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Loss recognitions on write-downs of inventories When write-down is included in cost of goods sold, the gross profit margin is affected. Analyst should be aware of the impact of write-downs on the gross profit margin when comparing between periods.
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is used more often produces a smoother earnings stream and higher earnings in the early years of the depreciation period does not reflect the economic reality of product usefulness is lower in quality
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Operating Expenses
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Operating Expenses
Pension accounting interest rate assumptions A change in the pension interest rate assumption can impact earnings equality. If the rate is decreased, the annual pension cost and the present value of the benefits will increase. If the rate is increased, pension cost and the present value of the benefits will decrease.
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Gain (loss) from operations of the division up to the time of sale Gain (loss) as a result of the sale, both net of tax
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Other Issues
Material Changes in Number of Shares Outstanding Changes can result from treasury stock purchases and the purchase and retirement of common stock. Reasons for the repurchase of common stock should be determined if possible to see if firm is spending scarce resources to merely increase earnings per share.
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Other Issues
Operating earnings, a.k.a. core earnings, pro forma earnings, or EBITDA Operating earnings are important for assessing the ongoing potential of a firm. Companies have created their own operating profit numbers and tried to convince users that these figures are the ones to focus on.
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Other Issues
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