Financial Reporting and Analysis Q95

95An analyst is estimating the net profit margin of a manufacturing company for next year. The method he adopts is to average the net profit margin for the past five years. Which of the following statements is most likely accurate with respect to the items used for his projections?

A
He must not include the gain on sale of investments, as it is a manufacturing firm.
B
He uses the most recent year‟s tax rate, which was only 60% of the previous two years‟ rate.
C
He must include the losses incurred due to discontinued operations in each of the five years.

Option : A
Explanation : Investments are not part of the core business. Discontinued operations are non-recurring items.

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