Identifying discontinued items is important if a potential investor is going to use reported net income to estimate a company's value.

Question

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Discontinued items can significantly affect a company's reported net income, either positively or negatively, depending on the gain or loss from the discontinuation. Excluding these one-time events provides a clearer view of the company's ongoing operational performance, which is crucial for accurate valuation.

Identifying Discontinued Items Is Important If a Potential Investor Is