The company provides a reconciliation of the $5.66 EPS figures to the income statement’s reported EPS...

The company provides a reconciliation of the $5.66 EPS figures to the income statement’s reported EPS figure of $8.78. Also referred to as “Core EPS” in a PepsiCo-related press release, this figure, $5.66, is a non-GAAP financial measure many companies choose to report. What does a non-GAAP financial measure mean? What does the terminology “core” suggest to you? What is the reason that many companies provide non-GAAP financial information in their financial reports?

Expert Solution

What does a non-GAAP financial measure mean?

Non-GAAP financial means standards which are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP), i.e., the adjustments made are not following the US GAAP and depends on a company.

Some examples of adjustments are:

Tax benefits associated with reorganizations of operations
Gains or losses related to mergers, acquisitions, divestitures and other structural changes
Charges or modifications related to the enactment of new laws, rules or regulations, such as significant tax law changes
Amounts related to the resolution of tax positions
Pension and retiree medical-related items
Asset impairments (non-cash)
Remeasurements of net monetary assets
Quantities related to mark-to-market gains or losses (non-cash)
Debt redemptions, cash tender or exchange offers
Charges related to restructuring programs

What does the terminology “core” suggest to you?

The core result is a non-GAAP financial measure which omits certain items from the historical results. Core EPS is the EPS adjusted for increase or decrease in stockholders’ equity rising from operations less realized and unrealized gains and losses, any incentive fees attributable to such net realized and unrealized gains and losses and any income taxes related to such realized gains.

What is the reason that many companies provide non-GAAP financial information in their financial reports?

Non-GAAP financial measures take into account the operating and strategic decisions, including the preparation of the operating plan, evaluation of the overall business performance and in determining compensation for some employees. Introducing non-GAAP financial measures provides supplementary information to aid comparison of past operating results and trends in underlying operating results, and provides additional clarity on how to estimate a business.

jeff jeffy answered 3 months ago

Sparkle plc, a high class jewellery retail company, reported the following figures. Income Statement (Profit and...

Sparkle plc, a high class jewellery retail company, reported the following figures. Income Statement (Profit and Loss Account) for year ended 30 September 2019 £m Revenue 2,480 Cost of sales (1,100) Gross profit 1,380 Administration and selling expenses (678) Operating profit 702 Debenture interest (31) Profit before taxation 671 Taxation (154) Profits for the year 517 Note: The directors have recommended a dividend of 11.4 pence per year in total in respect of 2019 to be paid following approval...

The following differences enter into the reconciliation of financial income and taxable income of Abbott Company...

The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable...

A firm reported the following income statement (all figures arein thousands of dollars):Net Sales...

A firm reported the following income statement (all figures are in thousands of dollars):Net Sales1,100-operating costs200-depreciation & amortization230=Operating Income (EBIT)?-interest76=Earnings Before Taxes (EBT)?-taxes81=Net Income?What is the operating income of this firm?NOTE: the - and = in red have been added to serve as a hint on how to compute each item of interest.A firm reported the following income statement (all figures are in thousands of dollars):Net Sales1,550-operating costs200-depreciation & amortization220=Operating Income (EBIT)?-interest77=Earnings Before Taxes (EBT)?-taxes70=Net Income?What is the net income...

Apple Inc. just reported an EPS of $3.30 on revenues of $260,174 million. The company has...

Apple Inc. just reported an EPS of $3.30 on revenues of $260,174 million. The company has 17,100 million shares outstanding. Total assets are $338,516 million, current liabilities equal $105,718 million, and long-term debt is $142,310 million. Net fixed assets are worth $175,697 million. Given this information, which one of the following statements is correct? Apple’s net working capital is $67,101 million. Apple’s total asset turnover is 1.77. Apple’s debt-equity ratio is 2.74. Apple’s current ratio is 3.54.

Nana Milk, a dairy product company, reported EPS of $2.40 in 2019, and paid dividends per...

Nana Milk, a dairy product company, reported EPS of $2.40 in 2019, and paid dividends per share of $1.06. The earnings and dividends had grown 7.5% a year over the prior five years, and were expected to grow 6% a year in the long term (starting in 2020). The stock’s required return is 12.775%, and the actual P/E ratio is currently 10. a) Estimate the fair P/E ratio for Nana Milk. b) What long-term growth rate is implied in the...

Nana Milk, a dairy product company, reported EPS of $2.40 in 2019 and paid dividends per...

Nana Milk, a dairy product company, reported EPS of $2.40 in 2019 and paid dividends per share of $1.06. The earnings and dividends had grown 7.5% a year over the prior five years and were expected to grow 6% a year in the long term (starting in 2020). The stocks required return is 12.775%, and the actual P/E ratio is currently 10. a) Estimate the fair P/E ratio for Nana Milk. b) What long-term growth rate is implied in the...

1)JSW Inc. reported 2015 basic EPS of $7.50 compared to 2014 basic EPS of $10.00. Which...

1)JSW Inc. reported 2015 basic EPS of $7.50 compared to 2014 basic EPS of $10.00. Which of the following activities could most plausibly and directly contribute to the changes observed in JSW’s basic EPS from 2014 to 2015? A Smaller issuance of preferred dividends in 2015 than in 2014. B Acquisition of a trademark in 2015. C Larger declines in the fair value of available for sale securities in 2015 than in 2014. D Large numbers of employee options were...

The pretax financial income (or loss) figures for Jerry Springer Company are as follows....

The pretax financial income (or loss) figures for Jerry Springer Company are as follows. 2009 $210,000 2010 180,000 2011 140,000 2012 (220,000) 2013 (230,000) 2014 90,000 2015 115,000 Pretax financial income (or loss) and taxable income (or loss) were the same for all years involved. Assume a 40% tax rate for 2009 and 2010 and a 35% tax rate for the remaining years. Instructions: Prepare the journal entries...

The following is a list of national income figures for a given year. All figures are...

The following is a list of national income figures for a given year. All figures are in billions. The ensuing question will ask you to determine the major national income measures by both the expenditures and income approaches. The answers derived by each approach should be the same. Consumption expenditure on durable goods……………………………………………………………..50 Transfer payments………………………………………………………………………………………..12 Rents……………………………………………………………………………………………………..14 Capital consumption allowance (depreciation)…………………………………………………………..27 Social security contribution………………………………………………………………………………20 Interest……………………………………………………………………………………………………21 Proprietors’ income……………………………………………………………………………………….45 Dividends…………………………………………………………………………………………………16 Compensation of employees…………………………………………………………………………….248 Indirect business taxes (taxes on production and imports).………………………………………………18 Undistributed corporate...

Mitch Company prepared the following reconciliation for the first year of operations: Pretax financial income for...

Mitch Company prepared the following reconciliation for the first year of operations: Pretax financial income for 2019 4,500,000 Permanent difference (357,000) Temporary difference (1,125.000) The temporary difference will reverse evenly in 2020 and 2021, at an enacted tax rate of 35% in 2019 and 32% in 2020. The enacted tax rate for 2019 is 30%. What amount should be reported as deferred tax asset or liability on December 31, 2019? (Specify whether asset or liability)

Question