You are considering purchasing shares in Telstra. From your accounting knowledge you know it is important to look at how Telstra earns an income, not just how much it earns because Telstra’s total profit after tax can be deceiving. It could be overstated because of a profit from the sale of property or because of a tax accounting anomaly. Hence, a record profit this year could lead you to miss the past three years of losses. A) Explain the three criteria you would consider in assessing Telstra’s earnings quality. B) Outline the advantages to a company from having high quality earnings.
You are considering purchasing shares in Telstra. From your accounting knowledge you know it is important to look at how Telstra earns an income, not just how much it earns because Telstra’s total profit after tax can be deceiving. It could be overstated because of a profit from the sale of property or because of a tax accounting anomaly. Hence, a record profit this year could lead you to miss the past three years of losses. A) Explain the three criteria you would consider in assessing Telstra’s earnings quality. B) Outline the advantages to a company from having high quality earnings.
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 73TA
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You are considering purchasing shares in Telstra. From your accounting knowledge you know it is important to look at how Telstra earns an income, not just how much it earns because Telstra’s total profit after tax can be deceiving. It could be overstated because of a profit from the sale of property or because of a tax accounting anomaly. Hence, a record profit this year could lead you to miss the past three years of losses.
A) Explain the three criteria you would consider in assessing Telstra’s earnings quality.
B) Outline the advantages to a company from having high quality earnings.
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