Match the item with the advantages and disadvantages of the income statements.
Advantages/Disadvantages
1. Evaluates past performance.
2. Predicts future performance.
3. Assesses risks or uncertainties of achieving future cash flows.
4. Excludes certain items.
5. Depends on accounting methods selected
6. Can be manipulated and managed.
7. Requires extensive judgment.
a. The sale of a specialized piece of equipment is unlikely to reoccur in the following year.
b. The income statements provide confirmatory value.
c. Managers make estimates and assumptions.
d. Investors expect past growth to continue.
e. Managers manage earnings to meet​ analysts' forecasts.
f. Pending lawsuits may not be reported.
g. Managers can choose from several inventory cost flow assumptions.
1. Evaluates past performance.
b
2. Predicts future performance.
d
3. Assesses risks or uncertainties of achieving future cash flows.
a
4. Excludes certain items.
f
5. Depends on accounting methods selected
g
6. Can be manipulated and managed.
e
7. Requires extensive judgment.
c
