What are shortcomings of an income statement for an analyst
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What are the shortcomings of the typical income statement? What can an analyst look for or do to factor these shortcomings into their analysis?
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Solution Summary
The solution lists 8 points for discussion, each containing one or two sentences in explanation of the limitations of the income statement to an analyst.
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From an analytical point of view, the income statement has some limitations which may explain why the accompanying balance sheet and Statement of Cash Flows are important as a package:
Specific limitations of the income statement:
1. It is usually presented in summary form, lacking the detail to analyze by
a. division
b. location
c. product
d. consolidated companies
2. It includes estimates and judgment calls by management and their ...
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