Holiday Greeting Cards is a local company organized late in July of 2023. The companys net income
Question:
Holiday Greeting Cards is a local company organized late in July of 2023. The company’s net income for each of its first six calendar quarters of operations is summarized as follows. (Amounts are stated in thousands of dollars.)
Hal Holcomb reports the business and economic news for a local radio station. On the day that Holiday Greeting Cards released the given financial information, you heard Holcomb make the following statement during his broadcast: “Holiday Greeting Cards enjoyed a 350 percent increase in its profits for the fourth quarter, and profits for the entire year were up by over 100 percent.”
Instructions
a. Show the computations that Holcomb may have used in arriving at his statistics.
b. Do you believe that Holcomb’s percent changes present a realistic impression of Holiday Greeting Cards’ rate of growth in 2024? Explain.
c. What figure would you use to express the percent change in Holiday’s fourth-quarter profits in 2024? Explain why you would compute the change in this manner.
Step by Step Answer:
a Holcomb appears to have computed the 350 increase in fourthquarter profits by comparing the fourthquarter profits of 2024 to those of the third quarter The computation is Holcombs conclusion that profits for the entire year were up by over 100 came from comparing the total profits of calendar year 2024 to calendar year 2023 The resulting percentage increase is 102 computed as follows b The 350 increase in fourthquarter profits developed by comparing fourthquarter profits to those of the third quarter is misleading because of the cyclical nature of Holiday Greeting Cards business The third quarter July through September contains no major greetingcard holidays whereas the fourth ...View the full answer
Financial And Managerial Accounting The Basis For Business Decisions
ISBN: 9781264445240
20th Edition
Authors: Jan Williams, Susan Haka, Mark Bettner
