Why is net income is not the best indicator of future income?
Because it includes non-recurring and non operating items
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Subject 6. Non-Recurring Items and Non-Operating Items <head>The goal of analyzing an income statement is to derive an effective indicator to predict future earnings and cash flows. Net income includes the impact of non-recurring items, which are transitory or random in nature. Therefore, net income is not the best indicator of future income. Recurring pre-tax income from continuing operations represents the company's sustainable income and therefore should be the primary focus of analysis.
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