question archive How would the following events (reported this year) affect your forecasts of a firm’s future net income? An asset write-down A merger or acquisition The sale of a major division The initiation of dividend payments
How would the following events (reported this year) affect your forecasts of a firm’s future net income? An asset write-down A merger or acquisition The sale of a major division The initiation of dividend payments
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- How would the following events (reported this year) affect your forecasts of a firm’s future net income?
- An asset write-down
- A merger or acquisition
- The sale of a major division
- The initiation of dividend payments
- An asset write-down
- A merger or acquisition
- The sale of a major division
- The initiation of dividend payments
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Answer:
- Management decision to write-down an asset could reveal new information about the stability of the investment or demand for inventories. If so, it would affect the expectations of a company’s future net profit.
- The way the acquisition is financed, and the accounting method used to record the transaction will affect the forecast of future net profit.
- It will affect the net profit of the Company as it will improve the efficiency and accountability of the Company.
- The cash dividend initiation can be thought of as management forecast of future earning improvement. The initiation of dividend payments sends a good signal to the capital market participants.
