Asked by Mario Alberto on Jun 17, 2024
Verified
Conventional wisdom is that
A) investors value a company's stock based on sustainable operating earnings.
B) investors focus on one-time special charges and write-offs.
C) "big bath" items adversely affect stock price.
D) restructuring an organization causes bankruptcy.
Sustainable Operating Earnings
The portion of a company's profit that is expected to continue in the future, excluding any one-time items or unusual income.
Big Bath Items
Large and often one-time charges taken by a company to write off or write down the value of assets, or to provide for expected future liabilities, sometimes used to manage earnings.
- Assess the repercussions of recognizing revenue on the financial health and performance metrics of a business.
Verified Answer
CG
Cassandra GuzmánJun 18, 2024
Final Answer :
A
Explanation :
Conventional wisdom suggests that investors value a company's stock based on sustainable operating earnings rather than one-time special charges or write-offs. This is because sustainable operating earnings are a better indicator of a company's future profitability and growth potential.
Learning Objectives
- Assess the repercussions of recognizing revenue on the financial health and performance metrics of a business.