when a client notices a discrepancy between annual profits calculated by the accountant versus your economic profit analysis. Use an example to illustrate to the client how a profit measure can differ between a cash-based profit (accounting) versus an economic measure of performance? Which should the client focus on and why?

Q: "The projected income statement method consists of taking the estimated income statement for the…

A: The income statement is the summary of income earned and expenses made in a certain period.…

Q: explain when and why the users of financial statements are not able to detect earnings management.

A: We should understand "Earnings management" first. Earnings management refers to the method of…

Q: What are the elements of uncertainty for internal shareholders that remain or are introduced when…

A: elements of uncertainty for internal shareholders  are discussed below

Q: One of the following answers does NOT correspond to the movements that make budgeting the earned…

A: Earned Capital is income earned from investing in business. It can be Net Profit or Net loss.…

Q: explain why an analyst attaches great importance to evaluation of the income statement

A: Meaning of Income statement- Income statement is one of the financial statements prepared by…

Q: Observe the net income for both companies. Which company is more profitable? Which company is more…

A: Solution:- Observation of net income for both companies as follows under:- Company 2010 2009 2008…

Q: Which TWO of the following are possible effects of rising prices upon financial statements?…

A: We have the following question: Which TWO of the following are possible effects of rising prices…

Q: The amount and trend in gross profit is closely monitered by management in assessing the…

A: Gross Profit = Total Sales revenue - Cost of Goods sold Net Profit = Gross Profit - Operating…

Q: In a financial statement or other financial forms, where do I find or how do I find: Net Income/…

A: Financial Statements are the official or formal records of the financial activities of the business.…

Q: A company can use comparisons of its financial data to the data of other companies and industry…

A: In order to evaluate the companies position, a company can take various measures

Q: After tax cash flow = Earnings after tax  +  __________ A sunk cost is one that has been incurred…

A: Cash flows after tax can be computed by adding back the depreciation or other sunk cost to the…

Q: a) Evaluate the financial performance of this company using the financial information only. b)…

A: Here discuss about the details of the evaluation of the performance with the financial activities…

Q: Why is the income tax payable not the same as income tax expense?  Why is the income tax expense…

A: Hey, since there are multiple questions posted, we will answer three question. If you want any…

Q: Accounting Just because the gross profit margin is positive does not mean that a company will be…

A: Ratio analysis is a tool that establishes a relationship between the different items. It is used to…

Q: Analyze the company’s profitability and its ability to generate sufficient operating profit by using…

A: Ratio Analysis The purpose of preparing the ratio analysis to know the strength and weakness of the…

Q: When analyzing a company's financial report, what are the most likely indicators that a company is…

A: A tax is a financial charge imposed by government. It is a source of income for the governments to…

Q: Explain how LIFO, FIFO, and Weighted average inventory systems will have different affects on a…

A: FIFO (First in first out) method makes the assumption that inventory items that are purchased first…

Q: Explain “ACCRUAL BASIS” and “CASH BASIS” briefly with your own word by giving specific examples. If…

A: The accrual basis of accounting represents that the revenue and expenses would be recorded when it…

Q: Why do you believe businesses rely heavily on revenue recognition to inflate profits

A: Here is the Answer

Q: Please select the option that best analyzes the PROFIT MARGIN for our example company.   The profit…

A: Profit margin is the percentage of sales, which explains how much profit a firm can earn for…

Q: Explain how earnings management from an informational perspective differs from the true income…

A: Earning management means to make the financial statements of the entity with the help of those…

Q: Explain the effect on the company's financial statements if a company switches from the historical…

A: A historical method is the accounting principle method in which the asset is recorded at the…

Q: How does EVA differ from accounting profit?

A: Introduction: Economic value added is the sum of net earnings over capital costs. EVA corresponds to…

Q: Which is wrong about the use of financial statement analysis? a. Seasonality factors may contribute…

A: Financial statements are the reports of an organization, prepared at the end of a financial period.…

Q: How does earnings management affect earnings quality?

A: Earnings of a company is referred as net income or bottom line item of a company. It is a very…

Q: Describe pro forma income and the importance of pro forma income in the evaluation of the income…

A: Pro forma income can be defined as an income which presents true and fair picture of financial…

Q: Which of the following questions cannot be answered when analyzing the information presented in an…

A: Answer: Income statement is the statement which shows the profit or loss when the revenue and…

Q: A financial manager's goal of maximizing current or short-term earnings may not be appropriate…

A: Short-term profits are earnings generated by the sale of an asset that a firm has owned for one year…

Q: Which of the following statements about accounting income and economic income is (are) correct? I.…

A: Accounting profits includes explicit costs only, whereas economic profits includes both explicit and…

Q: two reasons why these two numbers are usually different and provide an example for each difference?

A: Cash flow statement (CFS) is prepared for determining the actual cash balance that an entity has at…

Q: How is the income based valuation model important in the business? Discuss sub topics such as…

A: Income Based Valuation Approach esteem a business dependent on the past, current, or expected future…

Q: Observe the net income for both companies. Which company is more profitable? Which company is more…

A: Net income is defined as gross profit minus any other expenses and costs, as well as any other…

Q: Which of the following would not be used as a summary performance measure when using market…

A: In financial analysis the valuation of stock is done in term of multiples.

Q: FIFO and weighted average.  But what if a company wants to use LIFO to report its inventory because…

A: Introduction Dollar value of LIFO is an accounting method for valuation of inventory, this method…

Q: Is accrual accounting more closely related to a company’s goal of profitability or liquidity?

A: ACCRUAL CONCEPT - generally, the accrual concept recognizes revenue as and when it is accrued or…

Q: Where can I find the net profit after tax of a company? I am looking at a balance sheet and I do not…

A: Net profit after tax is to be found on income statement. It is the profit after deducting the tax…

Q: Explain the difference between NOPAT and net income. Which is a better measure of the performance of…

A: The net operating profits after taxes (NOPAT) is the operating profits after taxes. It includes all…

Q: The profitability and financial position of a firm can be judged to be improving, or det competitors…

A: In business there is need of comparing with other similar companies so that better valuation can be…

Q: Explain why balance sheet accounts are generally “averaged” and income statement figures are just…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: When making judgements lower profits and asset values are estimated rather than higher values. Which…

A: The underlying principles, assumptions, and circumstances that establish the parameters and…