The Wall Street Journal recently reported quarterly earnings for the technology company Acer, Inc. and the oil company Royal Dutch Shell. In the opening paragraph of the Acer article, it stated that there was a “41 percent jump in first-quarter profits, thanks in part to the sale of shares held in other companies.” Shell’s strong profits were “boosted by gains from proceeds of sales in the company’s portfolio of equity investments.”
a. From the preceding quotes can you tell whether the securities were classified as availablefor-sale or trading? Why?
b. Why would a financial statement reader want to separate profits from investment sales from other profits?
c. What earnings concept would an analyst be examining by separating different kinds of earnings?
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