When Luxury car maker BMW recently released earnings, the Wall Street Journal reported that it compared poorly to the prior year for a number of reasons, including:
Rising raw materials costs
Strength of the euro
A large gain booked during the year
Rising costs to introduce new models
These factors contributed to a 38 percent drop in quarterly income despite a 2.9 percent increase in sales.
Required
(a) Discuss where the above reasons would the represented in the financial statements.
(b) Which of the above reasons might be considered permanent and recurring?
(c) How is net income different from comprehensive income?
(d) On the day of the earnings announcement, BMW’s stock price rose 1 percent. What other factors would an analyst review in addition the earnings?