Ch 06 - Analyzing Operating Activities

Chapter 06 - Analyzing Operating Activities Activities

Chapter 6 Analyzing Analyzing Operating Operating Activities Activities REVIEW Income is the residual of revenues and gains less expenses and losses !et income is measur measured ed using using the accrual accrual "asis "asis of account accountin ing g Accrual ccrual account accounting ing recogn recognize izes s revenues and gains #hen earned$ and recognizes expenses and losses #hen incurred %he income statement &also referred to as statement of operations or earnings' reports net income during a period of time %his statement also reports income components(( revenu revenues$ es$ expense expenses$ s$ gains$ gains$ and losse losses s We analy analyze ze incom income e and its componen components ts to evaluate company performance, assess risk exposures, exposures, and predict amounts, timing, While e )"ot )"otto tom m line line)) net net inco income me fram frames es ou our  r  and uncert uncertain ainty ty of future future cash cash flows flows Whil analysis$ income components provide provide pieces of a mosaic revealing the economic portrait of a comp compan any y %h %his is chap chapte terr exami examine nes s the the anal analys ysis is and and inte interp rpret retat atio ion n of inco income me components We consider current reporting re*uirements and their implications for our  analysis of income components We descri"e ho# #e might usefully apply analytical ad+ustments to income components and related disclosures to "etter our analysis We direct special attention to revenue recognition and the recording of ma+or expenses and costs ,urther use and analysis is made of income components in -art %hree of the "oo.

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