ROLE OF THE SUSTAINABLE EARNINGS BASE



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The sustainable earnings base provides earnings information from which the distorting effects of nonrecurring items have been removed. Some analysts refer to such revised numbers as representing “core” or “underlying” earnings. Sustainable is used here in the sense that earnings devoid of nonrecurring items of revenue, gain, expense, and loss are much more likely to be maintained in the future, other things equal. Base implies that sustainable earnings provide the most reliable foundation or starting point for projections of future results. The more reliable such forecasts become, the less the likelihood that earnings surprises will result. Again, Phillips Petroleum captures the essence of nonrecurring items in the following:

These Topics Are Also In Your Syllabus ROLE OF THE SUSTAINABLE EARNINGS BASE
1 Types of Operating Systems - Batch operating system, Time-sharing systems, Distributed OS, Network OS, Real Time OS link
2 NONRECURRING ITEMS IN THE INCOME STATEMENT link
You May Find Something Very Interesting Here. ROLE OF THE SUSTAINABLE EARNINGS BASE link
3 NONRECURRING ITEMS IN THE STATEMENT OF CASH FLOWS link
4 NONRECURRING ITEMS IN THE INVENTORY DISCLOSURES OF LIFO FIRMS link
5 Types Of Systems link

Net income is affected by transactions defined by management and termed “special items,” which are not representative of the company’s ongoing operations. These transactions can obscure the underlying operating results for a period and affect comparability of operating results between periods.

These Topics Are Also In Your Syllabus ROLE OF THE SUSTAINABLE EARNINGS BASE
1 Types of Operating Systems - Batch operating system, Time-sharing systems, Distributed OS, Network OS, Real Time OS link
2 USING FINANCIAL RATIOS link
You May Find Something Very Interesting Here. ROLE OF THE SUSTAINABLE EARNINGS BASE link
3 COMBINING FINANCIAL RATIOS link
4 THE Z SCORE link
5 INTRODUCTION TO ANALYZING BUSINESS EARNINGS link

Rating - 3/5
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