Homework answers / question archive / Wozzie Wiggits Ltd

Wozzie Wiggits Ltd

Accounting

Share With

Wozzie Wiggits Ltd. produces and sells gaming software. In 2015, Wozzie’s net income exceeded analysts’ expectations in the stock markets by 8%, suggesting an 8% increase from operations. Included in net income was a significant gain on sale of some unused assets. The company also changed their inventory pricing policy from FIFO which is currently being used in their industry sector to weighted average cost, causing a significant drop in cost of goods sold. This policy change was fully disclosed in the notes to the financial statements

Based solely on the information above, do you think that Wozzie’s earnings are of high quality? Would you be willing to invest in this company based on the quality of earnings noted in the question?