The following income statement is for a public traded company in the U.S. Review the 3 years presented and determine which year has the highest earnings quality. State at least two reasons to support your answer.
The following income statement is for a public traded company in the U.S. Review the 3 years presented and determine which year has the highest earnings quality. State at least two reasons to support your answer.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 1PB
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The following income statement is for a public traded company in the U.S. Review the 3 years presented and determine which year has the highest earnings quality. State at least two reasons to support your answer.
![The following income statement is for a public traded company in the U.S. Review
the 3 years presented and determine which year has the highest earnings quality.
State at least two reasons to support your answer.
Year Ended
December 26,
December 28,
December 29,
(In millions, except per share amounts)
2020
2019
2018
2.069.
692.2
1.377.5
Net sales
1,740.1
1,797.9
610.8
1.187.1
Cost of products sold
570.8
Gross margin
1,169.3
949.6
999.4
Selling, general and administrative expense
1,060.5
Re-engineering charges
36.1
34.7
15.9
Gain on disposal of assets
14.0
12.9
18.7
Impairment expense
40.0
Operating income
197.6
125.9
319.8
Gain on debt extinguishment
(40.2]
Interest expense
38.6
41.5
46.5
(2.2)
(16.8)
(2.8)
(0.1)
276.2
Interest income
(1.5)
Other expense (income), net
(11.6)
Income before income taxes
212.3
103.4
Provision for income taxes
100.1
91.0
120.3
Net income
112.2 S
12.4
155.9
Basic earnings per share
2.29
0.26
3.12
Diluted earnings per share
2.14
0.25
3.11
5:34 PM
50°F Clear
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Transcribed Image Text:The following income statement is for a public traded company in the U.S. Review
the 3 years presented and determine which year has the highest earnings quality.
State at least two reasons to support your answer.
Year Ended
December 26,
December 28,
December 29,
(In millions, except per share amounts)
2020
2019
2018
2.069.
692.2
1.377.5
Net sales
1,740.1
1,797.9
610.8
1.187.1
Cost of products sold
570.8
Gross margin
1,169.3
949.6
999.4
Selling, general and administrative expense
1,060.5
Re-engineering charges
36.1
34.7
15.9
Gain on disposal of assets
14.0
12.9
18.7
Impairment expense
40.0
Operating income
197.6
125.9
319.8
Gain on debt extinguishment
(40.2]
Interest expense
38.6
41.5
46.5
(2.2)
(16.8)
(2.8)
(0.1)
276.2
Interest income
(1.5)
Other expense (income), net
(11.6)
Income before income taxes
212.3
103.4
Provision for income taxes
100.1
91.0
120.3
Net income
112.2 S
12.4
155.9
Basic earnings per share
2.29
0.26
3.12
Diluted earnings per share
2.14
0.25
3.11
5:34 PM
50°F Clear
(8:
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