how would the following events (reported this year) affect your forecast of a firm's future net...
how would the following events (reported this year) affect your forecast 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
Homework Answers
1.
Writing down of the assets, will make negative impact upon the brand image of the organization. It means assets are to be removed from the books and it will have negative impact upon the ability to generate income. So, it will negatively affect the forecast of future net income.
2.
Merger or acquisition will add value to the organization, increase efficiency & productivity. So, it will positively affect the future net income forecast.
3.
It will cause removal of the unit that was generating major part of the revenue. So, selling of the major division will negatively affect the forecast of future net income.
4.
It will reduce the earnings held by the organization, hence limiting the ability to invest in new projects on its own. So, it will negatively affect the forecast of future net income.
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