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    High of Profit/Low Operating Income

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    Provide an example from the Internet that demonstrates a situation in which a company's net profits looked good in the statements, but the gross or operating profits presented a different picture.

    Discuss how this might have occurred.

    "Why is the bottom-line figure, net income, not necessarily a good indicator of a firm's financial success?" (Hint: Look for indicators like liquidity or solvency to answer this question.)

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    Solution Preview

    The attached articles explain real situations where net profits looked good, but operating profits were relatively lacking:



    The two companies involved were able to show strong net profits despite weak sales because of ...

    Solution Summary

    The solution describes how a firm could could post good net profits but poor operating income at the same time.