Net Income should be based on earnings from the company's [...] because the analysis is to forecast the company's future performance.
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7. ANALYSIS OF THE INCOME STATEMENT on sales (profit margins).
Net Profit Margin shows how much profit is generated on every dollar of sales.
Net income is earnings after tax but before dividends (EBIT - interest - taxes). <span>It should be based on earnings from the company's continuing operation because the analysis is to forecast the company's future performance. Thus analysts should not consider earnings from discontinued operations, gains or losses from the sale of discontinued operations, and non-recurring income or expenses.
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