Extraordinary Items and Ratio Analysis

Choose at least two (2) items or events that you would consider to be extraordinary to a company. Propose the manner in which you would disclose these items or events to investors. Justify your response.

Determine the two (2) financial ratios that you believe to be the most important indicators of financial health for a company. Predict two (2) positive or two (2) negative financial outcomes should the chosen ratios change dramatically from one year to another. Provide a rationale for your response.

Please keep questions and answers together. Thank you

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An extraordinary item is a term used in accounting to show expenses that are unusual and significant in size. Let’s assume that Company UVW, an American company, operates a chain of beach resorts in the Florida Keys, and the resorts are damaged by an earthquake. Company UVW would show the expenses related to the earthquake in a separate line item on the income statement. In order for an expense to be extraordinary, the occurrence should not be normal and reasonable. Another example of extraordinary expenses…

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