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Chapter 3. Trend Interpretation: Decidin... > Sales by Operating Unit or Product

Sales by Operating Unit or Product

With core earnings in mind, we may be troubled by the inclusion of interest income with retail activity. It would be a more accurate form of disclosure to separate out the two, including a breakdown of gross profit, expenses and net earnings for merchandise and credit in separate columns.

The analysis points out the difficulty of understanding and interpreting core earnings in such instances. By removing interest income from the Sears results, we were able to estimate that gross margin and the expense trends were not as positive as they seemed at first glance. At the same time, the accuracy of removing credit sales entirely—either for the purpose of detailed analysis or as part of an adjustment for core earnings—is questionable. We can only interpret the numbers based on the level of detail supplied in the annual reports.


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