Over a two-year period Sears reported an 83 percent earnings drop: Net income of $309 million on sales of $10 billion dropped to net income of $53 million on sales of $8.8 billion. It so happened, however, that the $309 million in profits was boosted by a hefty gain on the sale of its credit card division, while the following year was marred by a big restructuring charge, including asset write-downs and an accrual for employee severance packages.
REQUIRED:
a. Where on the income statement would you find the charges related to asset sales and restructuring?
b. Describe how analysts might treat these special items, and comment on Sears’s performance across the two years.
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