Cisco Systems, Inc., the world's largest networking products company, announced on May 8, 2001, that itspro forma earnings for the quarter ended April 28, 2001, were $230 million. The company also disclosed that actual earnings for the quarter, determined according to generally accepted accounting principles, were a lossof $2.69 billion.

1. What is meant by the term pro forma earnings in this context?
2. How do pro forma earnings relate to the concept of earnings quality?
3. Access the company's 10-Q (quarterly report) for the quarter ended April 28, 2001. You can go to the company's Internet site, or EDGAR ( Using the company's income statement for the quarter and disclosure notes, reconcile the GAAP loss of $2.69 billion to the pro forma earnings figure of $230 million. Remember that both of these earnings (loss) figures are net of tax.

  • CreatedJune 24, 2013
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