Loder Company had a good year, and recorded a large gain on the sale of a discontinued business segment. Bates Company, on the other hand, had no discontinued business segments on its income statement. Otherwise, both income statements were very similar. Loder Company announced earnings of $1.25 per share and Bates announced earnings of $1.20 per share. Your friend Bob tells you that you should invest in Loder because it has higher quality earnings because it is larger. What is your response?

BuyFind

Financial Accounting

3rd Edition
Jane L. Reimers
Publisher: Pearson Higher Ed
ISBN: 9780133791129
BuyFind

Financial Accounting

3rd Edition
Jane L. Reimers
Publisher: Pearson Higher Ed
ISBN: 9780133791129

Solutions

Chapter 11, Problem 15E
Textbook Problem

Loder Company had a good year, and recorded a large gain on the sale of a discontinued business segment. Bates Company, on the other hand, had no discontinued business segments on its income statement. Otherwise, both income statements were very similar. Loder Company announced earnings of $1.25 per share and Bates announced earnings of $1.20 per share. Your friend Bob tells you that you should invest in Loder because it has higher quality earnings because it is larger. What is your response?

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