Income Concepts and Income statement Assignment

Income Concepts and Income statement - Assignment ExampleIt is the most traditional mode of determining the quality of the income. Through this way, the occupancy can realize whether it make a profit or a loss. Analysts eat however criticized this method arguing that it only foc holds on short-term profits and losses, but not farseeing term. They, however, discourage mostly businesses from using it. It is, however, the most common output generated by accounting software when analyzing the earnings of a company (Porter & Norton, 2012).Second, small businesses that earn their tax income through sales, sales growth is the most ideal metric to measure the quality of the earnings. It shows roughly the estimate of how the business is trending throughout time. The sales growth method measures the percentage of the earnings as a percentage of growth throughout a year. It is in terms of either positive sales growth or negative sales growth. Positive sales growth indicates that the busine ss is growing while, on the contrary, negative sales growth shows that the sales have declined over the past times year (Porter & Norton, 2012).Financial ratios can be used to determine the quality of the earnings of the firm. Using the companys financial statements, there can be an easy computation of financial ratios. It is the most efficient and simplest way to determine the performance of a firm. If you focus on the right type of ratio, your analysis of the concern, you have can come out right. For instance, if you are most concerned with the ability of your firm to convert assets to cash for satisfying a short term goal, you whitethorn most probably calculate some liquidity ratios and see how many dollars of current assets you have for each dollar of current liabilities. It is usually useful to the business owner who has less time but needs quick information on the performance of the firm (Porter & Norton, 2012).Additionally, a firm can also use expense reduction as metric for determining the quality of income. The expense reduction