tailieunhanh - Lecture Accounting: Tools for business decision making (5th edition): Chapter 13 - Kimmel, Weygandt, Kieso

Chapter 13 - Financial analysis: The big picture. After studying this chapter you will be able to understand: Apply the concepts of sustainable income and quality of earnings, apply horizontal analysis and vertical analysis, analyze a company’s performance using ratio analysis. | FINANCIAL ANALYSIS: THE BIG PICTURE Accounting, Fifth Edition 13 After studying this chapter, you should be able to: Understand the concept of sustainable income. Indicate how irregular items are presented. Explain the concept of comprehensive income. Describe and apply horizontal analysis. Describe and apply vertical analysis. Identify and compute ratios used in analyzing a company’s liquidity, solvency, and profitability. Understand the concept of quality of earnings. Learning Objectives Preview of Chapter 13 Accounting Fifth Edition Kimmel Weygandt Kieso LO 2 Indicate how irregular items are presented. Sustainable Income Sustainable Income - Net income adjusted for irregular items. Irregular Items Irregular items are separately identified on the income statement. Two types are: Discontinued operations. Extraordinary items. These “irregular” items are reported net of income taxes. LO 1 Understand the concept of sustainable income. Sustainable Income Components of the income statement Illustration 13-1 LO 2 Indicate how irregular items are presented. Discontinued Operations Disposal of a significant component of a business. Income statement should report a gain (or loss) from discontinued operations, net of tax. Sustainable Income LO 2 Indicate how irregular items are presented. Illustration: Rozek Inc. has revenues of $ million and expenses of $ million from continuing operations in 2014. The company therefore has income before income taxes of $800,000. During 2014 the company discontinued and sold its unprofitable chemical division at a loss of $210,000 (net of $90,000 tax savings). Sustainable Income LO 2 Illustration 13-2 Extraordinary items are events and transactions that meet two conditions: Both Unusual in nature and Infrequent in occurrence Company must consider the environment in which it operates. Amounts reported “net of tax.” Sustainable Income LO 2 Indicate how irregular items are presented. Illustration: In 2014 a revolutionary foreign . | FINANCIAL ANALYSIS: THE BIG PICTURE Accounting, Fifth Edition 13 After studying this chapter, you should be able to: Understand the concept of sustainable income. Indicate how irregular items are presented. Explain the concept of comprehensive income. Describe and apply horizontal analysis. Describe and apply vertical analysis. Identify and compute ratios used in analyzing a company’s liquidity, solvency, and profitability. Understand the concept of quality of earnings. Learning Objectives Preview of Chapter 13 Accounting Fifth Edition Kimmel Weygandt Kieso LO 2 Indicate how irregular items are presented. Sustainable Income Sustainable Income - Net income adjusted for irregular items. Irregular Items Irregular items are separately identified on the income statement. Two types are: Discontinued operations. Extraordinary items. These “irregular” items are reported net of income taxes. LO 1 Understand the concept of sustainable income. Sustainable Income Components of the income .