COMM-1107EL Chapter Notes - Chapter 11: Share Capital, Issued Shares, Weighted Arithmetic Mean
14 Mar 2017
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A corporation"s net income (including earnings per share) receives more attention than any other item in the financial statements : to shareholders, the larger the net income, the greater the likelihood of dividends. In addition, an upward trend in net income generally results in a higher share price over time: to creditor"s, a larger net income indicates a better ability to pay debts. The 3 most prominent components of earnings quality are: proper revenue and expense recognition, low operating expenses compared to sales, and high and improving operating earnings as a percentage of sales. The first component of earnings quality revenue recognition relates to the revenues that are reported in the. In chapters 3-6, we learned about the recognition and measurement of revenue . Recall how internal controls can prevent fraud related to improper revenue recognition and minimize the risk of not collecting cash from customers.
