Sunday, 5 February 2012

Income Statement in Perspective

When problems exist in an income statement, they tend to distort earnings only in a single year, or over a short period of time.

To even out these short-term distortions, use average share price, annual earnings, and other numbers over a span of 7 to 10 years.

"Averaging" establishes typical numbers for the company.  The longer the time included in the average, the better.

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