chapter 4

Question 1

income statement

Answer 1

is the report that measures the success of company operations for a given period of time

Question 2

usefulness of the income statement

Answer 2

1. evaluate the past performance of the company.
2. provide a basis for predicting future performance
   3 help asses the risk or uncertainty of achieving future cash flows

Question 3

Limitations

Answer 3

1. companies omit items from the income statement that they can’t measure reliably
2. income numbers are affected by the accounting methods employed
3. income measurement involves judgement

Question 4

earning management

Answer 4

the planned timing of revenues, expenses gains and losses to smooth out bumos in earnings

Question 5

modified all-inclusive concept

Answer 5

1. unusual and infrequent gains and losses
2. discontinued operations
3. noncontrolling interest
4. earnings per share

Question 6

basic earning per share

Answer 6

(net income -preferred dividends)/common shares outstanding