阅读和分析财务报表【外文翻译】.doc

1、外文文献翻译原文READINGANDFINANCIALSTATEMENTSAREINTENDEDTOGIVEASNAPSHOTOFHOWSUCCESSFULLYTHISCREATIONOFVALUEISBEINGACCOMPLISHEDBUTUNLESSYOUREAPROFESSIONALACCOUNTANT,YOUMAYFINDTHATALOOKATANANNUALREPORTISLIKEAVISITTOANALIENPLANETYOULLENCOUNTERODDTERMINOLOGY,STRANGECALCULATIONS,ANDOFCOURSEBIGNUMBERSTHISGUIDESHO

2、ULDHELPMAKETHINGSMOREACCESSIBLEITEXPLAINSTHETHREEIMPORTANTFINANCIALSTATEMENTSFROMTHEANNUALREPORTOFACOMPANYINCOMESTATEMENTHOWGOODTHECOMPANYISATMAKINGMONEY,ITMEASURESPERFORMANCEOFORGANIZATIONDURINGTHEPERIOD,ITISALSOCALLEDTHESTATEMENTOFOPERATIONSORTHEPROFITANDLOSSSTATEMENTCASHFLOWSTATEMENTHOWTHEYREPAYI

3、NGFORTHEIROPERATIONSANDTHEIRFUTUREGROWTH,ITEXPLAINSHOWCASHWASGENERATEDANDUSEDDURINGTHEPERIODBALANCESHEETWHATTHECOMPANYOWNSANDOWES,ITSHOWSASSETSLIABILITIESOFTHEORGANIZATIONONTHEGIVENDAY,WHICHISALSOREFERREDTOASTHESTATEMENTOFFINANCIALCONDITIONORSTATEMENTOFFINANCIALPOSITIONTHESESTATEMENTSAREPREPAREDANDP

4、RESENTEDUSINGTECHNICALTERMSANDRULESTHATAREBECOMINGINCREASINGLYCOMPLEXINTERPRETATIONOFTHESESTATEMENTSMAYBEAFORMIDABLECHALLENGETOMANYMANAGERSANDOWNERSBUSINESSENTERPRISEPRESENTSTHEIRDATAINAREASONABLYCONSISTENTFORMAT,ALTHOUGHFROMTIMETOTIMEYOUWILLENCOUNTERSOMEEXCEPTIONSFINANCIALSTATEMENTSFORPUBLICLYTRADE

5、DCOMPANIESAREPRESENTEDINACCORDANCEWITHGENERALLYACCEPTEDACCOUNTINGPRINCIPLESGAAP,WHICHISACOLLECTIONOFGUIDELINESTHATPRACTITIONERSSAYRESULTSINAFAIRPRESENTATIONOFAORGANIZATIONSFINANCIALSITUATIONANDRESULTSUSUALLY,COMPANYSTATEMENTSAREPREPAREDINTERNALLYBUTTHENAREEXAMINEDBYPUBLICACCOUNTANTSORAUDITORSACCOUNT

6、ANTSARGUETHATUSINGGAAPISNOTLIKEAPPLYINGTHERULESOFSCIENCEBUTISMORELIKEANARTFORMTHISMEANSTHATTHEAPPLICATIONOFGAAPCANVARYFROMCASETOCASE,ANDTHEALERTREADERSHOULDKEEPTHISCAUTIONINMIND,ALWAYSQUESTIONINGTHEASSUMPTIONSBEHINDACOMPANYSNUMBERSTHREEKEYCONSIDERATIONSAREATTHEHEARTOFGAAPMATERIALITYACCOUNTANTSARGUET

7、HATWHATMIGHTBEMATERIALINONECASEMIGHTNOTBEMATERIALINANOTHERACCOUNTANTSCONSIDERTHEAMOUNTANDNATUREOFTHEITEMWHENDECIDINGIFSOMETHINGISMATERIALACCOUNTANTSFEELTHATBECAUSETHISISOBVIOUSLYASUBJECTIVEMATTER,THEYMUSTRELYONTHEIRJUDGMENTANDEXPERIENCEINDUSTRYPRACTICEBECAUSEFINANCIALPRACTICESVARYFROMINDUSTRYTOINDUS

8、TRY,ITHASBEENIMPOSSIBLETODEVELOPONESETOFACCOUNTINGSTANDARDSANDPROCEDURESFORALLINDUSTRIESFOREXAMPLE,ACCOUNTINGFORFINANCIALINSTITUTIONSISFARDIFFERENTFROMACCOUNTINGFORRETAILERS,ANDVERYDIFFERENTFROMNONPROFITACCOUNTINGTHEREFORE,MOSTINDUSTRIESHAVEMODIFIEDGAAPFORTHEIRPURPOSESCONSERVATISMBECAUSEACCOUNTINGFR

9、EQUENTLYINVOLVESUNCERTAINTY,ACCOUNTANTSFAVORCONSERVATISMPRUDENCE,UNDERSTATINGASSETSANDINCOME,ANDOVERSTATINGLIABILITIESANDEXPENSESCONSERVATISMISALSOEVIDENTINTHEPRINCIPLEOFHISTORICALCOSTS,WHEREBYACCOUNTANTSGREATLYPREFERTOLISTITEMSATORIGINALCOSTINFINANCIALSTATEMENTSTOSUPPORTABOVEDISCUSSION,WESHOULDUNDE

10、RSTANDSTHATACCOUNTINGISAPROCESSTHATREFINEFINANCIALTRANSACTIONSTAKINGPLACEDURINGTHEYEARANDEVENTSOCCURRINGTHEPROCESSISBASEDONCOMBINATIONOFPRINCIPLESOFSCIENCEANDARTTHESEPRINCIPLESAREDUETOACCOUNTINGASSUMPTIONS,CONVENTIONSANDACCOUNTINGCONCEPTSTHEPROCESSISINITIATEDBYJOURNALENTRIES,FOLLOWEDBYLEDGERPOSTING,

11、TRIALBALANCEANDEXTRACTINGFINANCIALSTATEMENTSTHISISTOMEASUREOPERATIONALEFFICIENCYOFTHEORGANIZATIONINCOMESTATEMENT,TOSHOWASSETSLIABILITYSTATUSBALANCESHEETANDEXPRESSABILITYTOGENERATEUSECASHCASHFLOWSTATEMENTTHEINCOMESTATEMENTONLYRECORDSREVENUEEXPENSESRECEIPTS,ANDATTHEENDOFTHEPERIOD,THEBALANCEISTRANSFERR

12、EDTOBALANCESHEETTHUS,INCOMESTATEMENTISAFFECTEDONLYBYATRANSACTIONHAVINGREVENUENATUREWHILEBALANCESHEETISAFFECTEDBYREVENUEASWELLASCAPITALTRANSACTIONHEREITISPERTINENTTOUNDERSTANDTHEDIFFERENCEBETWEEN,REVENUECAPITALTRANSACTIONREVENUETRANSACTIONISORDINARYACTIVITYOFTHEBUSINESS,ANDITGENERATESPROFITORLOSSDUET

13、OTRANSACTIONSWITHTHETHIRDPARTIESCAPITALTRANSACTIONSARERELATEDTOOWNERSFIXEDASSETSTHEBALANCESHEETTHISISASNAPSHOTOFTHECOMPANYONONEGIVENDAY,THELASTDAYOFTHEREPORTINGPERIODTHUS,THEBALANCESHEETWILLSHOWTHEDATEITWASCOMPILED,SUCHASMARCH31,2007THERIGHTSIDEOFTHEBALANCESHEETLISTSTHEASSETS,ORWHATTHECOMPANYOWNSONT

14、HELEFTSIDEARETHELIABILITIES,ORWHATTHECOMPANYOWES,ANDTHESHAREHOLDERSEQUITY,ORTHEFUNDSCONTRIBUTEDBYTHESTOCKHOLDERSTHETWOSIDESMUSTBALANCE,SOTHEBALANCESHEETCANBESUMMARIZED,ASASSETSEQUALLIABILITIESPLUSSHAREHOLDERSEQUITYALETHEBALANCESHEETORSTATEMENTOFFINANCIALPOSITION/CONDITIONISSONAMEDBECAUSEITREPRESENTS

15、THEFOLLOWINGEQUATIONEQUITYLIABILITIESASSETSATANYPOINTINTIMETHISBASICEQUATIONHOLDS,ALTHOUGHTHEAMOUNTSASSIGNEDTOTHEINDIVIDUALELEMENTSWILLFLUCTUATEASSETSINCREASEORDECREASEASRESOURCESAREOBTAINED,DISPOSEDOF,BECOMELESSVALUABLE,ORBECOMEUSEDUPEXPENSEDINTHECOURSEOFOPERATIONSINLIMITEDCIRCUMSTANCES,INCREASESIN

16、VALUEAREALSOREFLECTEDINTHERECORDEDAMOUNTSOFASSETSLIABILITIESINCREASEORDECREASEASOBLIGATIONSAREINCURREDORLIQUIDATEDINSOMECASES,THEAMOUNTSOFLIABILITIESMAYNEEDTOBEESTIMATEDANDARESUBJECTTOADJUSTMENTUPWARDORDOWNWARDINLATEPERIODSINLIMITEDCIRCUMSTANCES,RECORDEDLIABILITIESARECONTINGENTUPONTHEOCCURRENCEOFFUT

17、UREEVENTS,ANDMAYNOTCOMETOPASSATALLEQUITYINCREASESORDECREASESPRIMARILYASARESULTOFINCOMEORLOSSFROMOPERATIONSOFTHEBUSINESSITALSOINCREASESWHENTHEOWNERSCONTRIBUTECAPITALTOTHEBUSINESS,ANDDECREASESWHENTHECAPITALISWITHDRAWNORDIVIDENDSAREPAIDBECAUSETHEFISCALYEARENDBALANCESHEETSHOWSDATAFORTHETWOMOSTRECENTYEAR

18、S,ITISPOSSIBLETOCALCULATECHANGESINTHEACCOUNTSOFTHECURRENTYEARFROMTHEPREVIOUSYEARBALANCESHEETINFORMATIONISORGANIZEDWITHTHELEASTLIQUIDITEMSATTHETOPANDMOVESDOWNTOITEMSOFHIGHESTLIQUIDITYASSETSKEYCOMPONENTSOFTHEASSETSIDEOFTHEBALANCESHEETARECASHANDCASHEQUIVALENTSCASHANDCASHEQUIVALENTSREPRESENTPHYSICALCASH

19、,BANKACCOUNTBALANCES,ANDVERYSHORTTERMINVESTMENTS,WHICHMIGHTBEGOVERNMENTSECURITIESORCOMMERCIALPAPERMARKETABLESECURITIESINVESTMENTOFTEMPORARYCASHBALANCESINSHORTTERMMONEYMARKETSECURITIESWITHMINIMALRISKANDMATURITYOFLESSTHANONEYEARTYPICALMARKETABLESECURITIESARETREASURYBILLS,COMMERCIALPAPER,ANDCERTIFICATE

20、SOFDEPOSITACCOUNTSRECEIVABLEORRECEIVABLESAMOUNTSOWEDTOTHECOMPANYFORGOODSANDSERVICESSOLDBYTHECOMPANYTHERECEIVABLESCATEGORYTYPICALLYINCLUDESANALLOWANCEFORDOUBTFULACCOUNTSTHATTHECOMPANYEXPECTSWILLNOTBEPAIDTHESEAMOUNTSAREBASEDONTHECOMPANYSPASTEXPERIENCEANDINDUSTRYAVERAGESNOTESRECEIVABLEOBLIGATIONSOWEDTH

21、ECOMPANYBYANOTHERENTITYINVENTORIESGOODSAVAILABLEFORSALEORMATERIALSFORPRODUCINGGOODSINVENTORYCANBEINONEOFTHREECATEGORIESRAWMATERIALS,WORKINPROCESS,ORFINISHEDGOODSINVENTORIESMAYBEVALUEDBYDIFFERENTMETHODSTHETWOMOSTCOMMONAREFIRSTIN,FIRSTOUTFIFO,ANDLASTIN,FIRSTOUTLIFOUNDERFIFO,THECOMPANYASSUMESTHATTHEINV

22、ENTORYISSOLDINTHECHRONOLOGICALORDERINWHICHITWASPURCHASEDUNDERLIFO,THECOMPANYASSUMESTHATTHELASTMERCHANDISEAVAILABLEISTHEFIRSTSOLDLIFOANDFIFOAREONLYACCOUNTINGPROCEDURESANDARETOTALLYINDEPENDENTOFTHEWAYPHYSICALINVENTORYISREALLYUSEDWITHNOINFLATION,LIFOANDFIFOWILLPRODUCEESSENTIALLYTHESAMECOSTFORINVENTORYH

23、OWEVER,UNDERHIGHINFLATION,LIFOVALUATIONPUTSACOSTONINVENTORYCLOSERTOTODAYSREPLACEMENTCOSTTHEIMPACTOFTHEINVENTORYVALUATIONMETHODCHOSENEXTENDSBEYONDTHEBALANCESHEETTOTHEINCOMESTATEMENTBECAUSETHECOSTOFRAWMATERIALSINVENTORYISINCLUDEDIN“COSTOFGOODSSOLD“ONTHEINCOMESTATEMENTWITHHIGHINFLATION,LIFOWILLPRODUCEH

24、IGHERCOSTOFGOODSSOLD,ANDTHEREFORELOWERTAXABLEINCOME,WHILETHEBALANCESHEETENTRY“INVENTORIES“WILLBELOWERTHEMETHODOFINVENTORYVALUATIONANDDEPRECIATIONTHATCANBEUSEDFORACCOUNTINGPURPOSEANDTAXATIONPURPOSEISSOMETIMEINCONTRASTOTHERCURRENTASSETSTHESEAREITEMSTHEBUSINESSWILLDERIVESOMEBENEFITFROMWITHINTHENEXTYEAR

25、,ANDINCLUDEITEMSSUCHASPREPAIDINSURANCE,PREPAIDINCOMETAX,ANDPREPAIDINTERESTPROPERTY,PLANTANDEQUIPMENTPROPERTYANDEQUIPMENT,OFTENCALLEDFIXEDASSETS,INCLUDELAND,BUILDINGS,EQUIPMENT,ANDLEASEHOLDIMPROVEMENTSTHESEASSETSARERECORDEDATHISTORICALCOST,ANDTHEN“DEPRECIATED“OVERTHETIMEPERIODTHEYBENEFITTHEFIRMEXCEPT

26、FORLANDWHICHISNOTDEPRECIATEDBECAUSEITISASSUMEDTOHAVEANINFINITELIFEDEPRECIATIONMEANSTHATASSETSSUCHASPLANTANDEQUIPMENTAREAMORTIZED,ORWRITTENOFF,SOASTOALLOCATETHECOSTOVERTHEIRDEPRECIABLELIFEESSENTIALLY,THISISHOWACCOUNTANTSDEALWITHTHEFACTTHATTHESEASSETSWEAROUTTHROUGHUSEDEPRECIATIONEXPENSE,WHICHSHOWSUPON

27、THEINCOMESTATEMENT,REDUCESTAXABLEINCOMEBUTDOESNOTREDUCECASHFLOWINTHEFIRMINTANGIBLESCOSTSINCURREDORRECORDEDPREVIOUSLYWHICHCOULDPROVIDEAFUTUREBENEFITTOTHECOMPANYINTANGIBLESINCLUDEGOODWILL,PATENTSANDCOPYRIGHTSETCGOODWILLISONEOFTHEMOREDIFFICULTCONCEPTSFORBUSINESSREPORTERSTOGRASPITISNOT,ASMANYREPORTERSTH

28、INK,THEGOODFEELINGSPEOPLEHOLDFORACOMPANYINSTEAD,ITCOMESABOUTWHENTHECOMPANYPURCHASESANOTHERCOMPANYFORMORETHANITSBOOKVALUEBOOKVALUEISASSETSMINUSLIABILITIESTHEEXCESSACQUISITIONCOSTISPLACEDONTHEBOOKSAS“GOODWILL“THATMEANSTHATIFACOMPANYPAYSRS2MILLIONFORANOTHERCOMPANY,ANDTHEPURCHASEDCOMPANYSBOOKVALUEISRS1M

29、ILLION,THEGOODWILLISRS1MILLIONLIABILITIESKEYCOMPONENTSOFTHELIABILITY/OWNERSEQUITYSIDEINCLUDEACCOUNTSPAYABLEANDACCRUEDEXPENSESACCOUNTSPAYABLESARECLAIMSTHATOTHERSHAVEONTHECOMPANYFORPAYMENTFORGOODSORSERVICESRENDEREDPAYABLESWOULDINCLUDECREDITPURCHASESOFRAWMATERIALS,SUPPLIES,SERVICES,ETCACCRUEDEXPENSESOR

30、ACCRUEDLIABILITIESAREAMOUNTSOWEDFORGOODSORSERVICES,WHOSEBENEFITSHAVEBEENRECEIVEDBUTARETOBEPAIDINTHEFUTURETYPICALACCRUEDEXPENSESAREPAYROLL,PAYROLLTAXES,PROPERTYTAXES,RENT,ROYALTIES,INTEREST,COMMISSIONS,ETCACOMPANYMIGHTORMIGHTNOTSEPARATEACCRUEDLIABILITIESFROMACCOUNTSPAYABLEBUTTHECATEGORIESAREQUITEDIFF

31、ERENTAMOUNTSACCRUEDAREUSUALLYESTIMATESWHILEPAYABLESAREDEFINITEAMOUNTSACCRUEDLIABILITIESAREUSUALLYLIABILITIESFORWHICHNOBILLSHAVEBEENYETRECEIVEDPAYABLESAREBILLSLOANSANDNOTESPAYABLEAMOUNTSDUEWITHINAYEARONLOANSORNOTESCURRENTMATURITIESOFLONGTERMDEBTTHEAMOUNTOFTHELONGTERMDEBTTHATISDUEWITHINAYEARINCOMETAXE

32、SPAYABLEINCOMETAXESTOBEPAIDWITHINAYEARLONGTERMDEBTDEBTTHATMUSTBEPAIDINSOMEPERIODMORETHAN12MONTHSINTOTHEFUTUREDEFERREDINCOMETAXESTHISREPRESENTSRECONCILIATIONBETWEENTHECOMPANYSTAXACCOUNTINGANDFINANCIALREPORTINGMOSTCOMPANIESUSEONESETOFRULESFORCALCULATINGINCOMEANDINCOMETAXLIABILITY,ANDANOTHERSETFORPREPA

33、RINGFINANCIALSTATEMENTSSUCHASTHEANNUALREPORTTYPICALLY,COMPANIESUSESTRAIGHTLINEDEPRECIATIONFORFINANCIALREPORTINGANDACCELERATEDDEPRECIATIONMETHODSFORTAXPURPOSESBECAUSEITLOWERSTHECURRENTYEARSTAXLIABILITYHOWEVER,THESETAXESARENOTELIMINATED,JUSTDEFERREDTOFUTUREYEARSTHISACCOUNTCAPTURESTHEDIFFERENCEBETWEENT

34、AXESPAIDUNDERTHEACCELERATEDDEPRECIATIONMETHOD,ANDWHATWOULDBEOWEDIFSTRAIGHTLINEDEPRECIATIONHADBEENUSEDEQUITYKEYCOMPONENTSOFTHESTOCKHOLDERSORSHAREHOLDERSEQUITYCOMPONENTINCLUDECOMMONSTOCKTHISISTHEVALUEOFTHECOMMONSTOCKTHATHASBEENSOLDTOTHEPUBLIC,RECORDEDAT“PAR“ORASTATEDVALUEATTHETIMETHESTOCKWASISSUEDPARV

35、ALUEISANARBITRARYFIGUREASSIGNEDBYTHECOMPANYTHISENTRYALSOSHOWSHOWMANYSHARESTHECOMPANYSCHARTERAUTHORIZES,TOBESOLDANDHOWMANYSHARESHAVEACTUALLYBEENISSUEDPREFERREDSTOCKSOMECOMPANIESSELLPREFERREDSHARES,WHICHDIFFERSIGNIFICANTLYFROMCOMMONSTOCKPREFERREDSHAREHOLDERSAREENTITLEDTORECEIVEAFIXEDDIVIDENDBEFORECOMM

36、ONHOLDERS,ANDHAVEAPRIORITYINCASETHECOMPANYISLIQUIDATEDPREFERREDSTOCKOFTENISNONVOTINGCOMMONANDPREFERREDSTOCKAREOFTENCALLEDCAPITALSTOCKCAPITALSURPLUS,ADDITIONALPAIDINCAPITALORCAPITALINEXCESSOFPARVALUEOFSTOCKTHISISTHEADDITIONALAMOUNTPAIDBYTHEORIGINALPURCHASEROFTHECOMPANYSSTOCKINEXCESSOFPARVALUEOFSTOCKF

37、OREXAMPLE,IFACOMPANYOFFEREDANEWSTOCKISSUETOTHEPUBLICATRS10ASHARE,ANDITHADAPARVALUEOFRS1ASHARE,THECAPITALSURPLUSRECORDEDFROMTHATSALEWOULDBERS9PERSHARERETAINEDEARNINGSORREINVESTEDEARNINGSTHISISTHENETINCOMEREINVESTEDBACKINTHECOMPANYSINCEITWASCHARTEREDATTHEENDOFEACHACCOUNTINGPERIODEG,QUARTERLYORANNUALLY

38、NETINCOMEORLOSSFROMTHEINCOMESTATEMENTISTRANSFERREDTOTHERETAINEDEARNINGACCOUNTITEITHERREMAINSINTHEACCOUNTAS“RETAINEDEARNINGS“ORISPAIDOUTASDIVIDENDSTOTHESHAREHOLDERNOTETHATARETAINEDEARNINGSDOESNOTREPRESENTACASHBALANCECASHISSHOWNONTHEASSETSECTIONOFTHEBALANCESHEETFOREIGNCURRENCYTRANSLATIONADJUSTMENTASSE

39、TSANDLIABILITIESOFFOREIGNSUBSIDIARIESARETRANSLATEDATTHEENDOFEACHACCOUNTINGPERIODATCURRENTEXCHANGERATESTHERESULTSOFTHISFLUCTUATINGADJUSTMENTAREACCUMULATEDTHROUGHTIMEINTHISACCOUNTUNREALIZEDGAINONSECURITIESAVAILABLEFORSALETHISREPRESENTSPRICEAPPRECIATIONONFINANCIALASSETSHELDBYTHECOMPANYBUTNOTSOLDDURINGT

40、HEPERIODTHEINCOMESTATEMENTCOMPAREDWITHTHEBALANCESHEET,WHICHISASNAPSHOTOFTHECOMPANYATAPOINTINTIME,THEINCOMESTATEMENTREPRESENTSAFLOWOFFUNDSTHROUGHTHECOMPANYDURINGTHEREPORTINGPERIOD,INDICATEDASAPRIL1MARCH31,2007,ORFOR“FISCALYEAR200607“THISREPORT,ALSOREFERREDTOASANEARNINGSSTATEMENTORSTATEMENTOFPROFITAND

41、LOSS,ANSWERSTHEQUESTION,HOWMUCHDIDTHECOMPANYMAKEFORTHEPERIODTHEINCOMESTATEMENTORSTATEMENTOFOPERATIONSISATABULATIONOFREVENUEANDEXPENSES,THELATTERUSUALLYBROKENDOWNORSUMMARIZEDBYMAJORCATEGORIESOPERATINGINCOMEISANIMPORTANTMEASUREOFTHEENTITYSPERFORMANCE,SINCEITREPRESENTSTHEPRETAXINCOMEEARNEDORLOSSINCURRE

42、DFROMTHECOREOPERATIONSOFTHEBUSINESS,BEFORECONSIDERINGCERTAINFINANCIALCOSTS,OTHERNONOPERATINGITEMS,ANDEXTRAORDINARYGAINSORLOSSESOTHERINCOMEANDEXPENSEINCLUDESFINANCIALCOSTSANDOTHERITEMS,THEOCCURRENCEOFWHICHARETANGENTIALTOTHEPRIMARYPURPOSESOFMEBUSINESS,SUCHASLOSSESONABANDONEDORSOLDASSETSKEYCATEGORIESON

43、THEINCOMESTATEMENTAREREVENUES,GROSSREVENUES,NETOPERATINGREVENUESORSALESTHISISTHETOTALAMOUNTOFSALESRECORDEDBYTHECOMPANYDURINGTHEACCOUNTINGPERIODCOSTOFGOODSSOLDTHISISTHELARGESTEXPENSEONTHEINCOMESTATEMENTTHISCATEGORYTYPICALLYINCLUDESTHECOSTOFINVENTORY,LABOR,ANDDIRECTOVERHEADUSEDTOPRODUCETHEFINISHEDPROD

44、UCTTHECOSTOFGOODSSOLDISDIRECTLYRELATEDTOTHECOMPANYSINVENTORYVALUATIONMETHOD,WHICH,ASNOTEDEARLIER,CANRESULTINHIGHERORLOWERINVENTORYVALUE,ANDLOWERORHIGHERINCOME,DEPENDINGONTHEMETHODEMPLOYEDGROSSPROFITWHENCOSTOFGOODSSOLDISDEDUCTEDFROMREVENUESTHERESULTIS“GROSSPROFIT“OPERATINGEXPENSESCOMPANYSTATEMENTSVAR

45、YGREATLYATTHISPOINTOPERATINGEXPENSESMIGHTBECAREFULLYBROKENOUTORMIGHTGENERALLYBECOVEREDINACATEGORYSOMECOMPANIESCALL“SELLING,GENERALANDADMINISTRATIVEEXPENSES“OPERATINGEXPENSESCANINCLUDERENTONLANDANDBUILDINGS,SALARIESANDWAGESPAID,PAYROLLTAXES,PROPERTYTAXES,TELEPHONE,INSURANCE,RESEARCHANDDEVELOPMENT,DEP

46、RECIATIONANDAMORTIZATION,ANDBADDEBTSOPERATINGINCOME,OPERATINGPROFITORINCOMEFROMOPERATIONSTHISISWHATSLEFTAFTERTHEOPERATINGEXPENSESAREDEDUCTEDFROMTHEGROSSPROFITOTHERINCOMEANDEXPENSESRELATEDTOCONTINUINGOPERATIONSCOMPANIESMAKEANDLOSEMONEYTHROUGHACTIVITIESTHATARENOTPARTOFTHECOREBUSINESSITSELFTHESEITEMSIN

47、CLUDEINTERESTINCOME,INTERESTEXPENSE,GAINORLOSSONSALESOFSECURITIESANDOTHERASSETS,ETCINCOMEBEFOREINCOMETAXESANDCHANGESINACCOUNTINGPRINCIPLESTHISISWHATSLEFTAFTERTHEOTHEREXPENSESAREDEDUCTEDFROMOPERATINGINCOMEINCOMETAXESANDCHANGESINACCOUNTINGPRINCIPLESINCOMETAXESREFLECTTHEAMOUNTOFINCOMETAXTHECOMPANYPAIDI

48、NTHATYEARCHANGESINACCOUNTINGPRINCIPLESOFTENFORCEACCOUNTINGCHANGESTHATHAVEPOSITIVEORNEGATIVEEFFECTSONTHEINCOMESTATEMENTTHOSEEFFECTSALSOARERECORDEDHERENETINCOMETHISISWHATSLEFTAFTEREXPENSESHAVEBEENDEDUCTEDFROMGROSSPROFITMOSTINCOMESTATEMENTSALSOCONTAINSEVERALOTHERPIECESOFINFORMATIONRELATEDTOTHECOMPANYSP

49、ERFORMANCEFORTHATYEARTHEYINCLUDEEARNINGSPERSHARENETINCOMEDIVIDEDBYTHENUMBEROFSHARESOUTSTANDINGYIELDSTHEPORTIONOFACOMPANYSPROFITALLOCATEDTOEACHOUTSTANDINGSHAREOFCOMMONSTOCKTHEFIGUREISCALCULATEDAFTERPAYINGTAXESANDAFTERPAYINGDIVIDENDSTOPREFERREDSHAREHOLDERS,IFANYAVERAGESHARESOUTSTANDINGTHISISTHEAVERAGENUMBEROFCOMMONSHARESOUTSTANDINGFORTHEREPORTPERIODTYPICALREASONSFORTHENUMBEROFSHARESTOVARYDURINGTHEREPORTINGYEARARETHEDISTRIBUTIONOFSTOCKTOEMPLOYEESUNDEREMPLOYEEINVESTMENTPLANS,OREXECUTIVEBONUSPROGRAMSOCCASIONALLY,WITHAVERAGESHARESOUTSTANDING,ONEENCOUNTERSTHEPHRASE“DILUTED,“WH