Discussion

"Sustainable Income and Ratio Analysis" Please respond to the following:

• Describe sustainable income and the importance of sustainable income in the evaluation of the income statement. Choose at least two items or events that will affect sustainable income of a company. Using a real example is preferred for this discussion.

This week's discussion ties back to our discussion last week. In comparing income to operating cash flow, you may have noticed some differences. Were any of those differences due to items that will not recur? If the company 's net income included an irregular item, you want to realize that this income will not be repeated. I remember some mention of an unusual swing in net income from year to year. Was that caused by an irregular item? When assessing the value of a company and its future prospects, you want to know the income that is sustainable. Sustainable in that the company can be expected to earn that in the future. If you ave an irregular item, the income (or loss) from that item will not occur again.

Do you have a real example you can discuss? The discussion will be much better if you present a real company's information. It may show an irregularity or not. Either way the information will be helpful in determining the sustainability of the company's earnings.