Entrust, Inc., is a global provider of security software; it operates in one business segment involving the design, production, and sale of software products for securing digital identities and information. The consolidated statements of operations for a three-year period (all values in thousands) follows. On January 1, Year 1, the Entrust common shares traded at $10.40 per share; by year end Year 3, the shares traded at $3.80 per share. The company's cash flow from operations was $(27,411), $(20,908), and $9,606, for Year 1, Year 2, and Year 3, respectively.

Calculate the sustainable earnings of Entrust, Inc., for each of the three years. Compare the company's reported net income (loss) with its sustainable earnings. Does Entrust's share price at year-end Year 3 reflect the firm's apparent turn-around? Why or why not?

Permanent Versus Tl'IrlilInl' Earnings Entrust. Inc.. is aglohal provider ofsecuril)I sowale; it operates in dne business segment imwingthedesign. prdduction. and sale at software products forsecuringdigital identities and information_The onnsulidahed statementsof operations forathree-year period iallvalues in thousands] follows. Dnjanuary I. Year 1. the Emma: cdrnmdn shares traded at 510.40 per share: byyear end Year 3. thesharestraded at $3.60 per share. The oompany's cash dwfrom operations was 5m.d1 1]. 5(203061. and 59.606. for'l'ear I. Year 2. and'l'eari respectively. Calculate lite sustainable earnirg ofEntrusr. Inc- foreach dfthethree years. Compare the cdmpanfs reported net incdme (loss! with its sustainable earnings. Does Entrust's share price at yearend'l'earB reectthe rms apparencturn- around? Why pr why not? lll'l'llUFl'. Ill'. Cal-undated Slam-mun dollar-dam W'EndldbulnIe-S'IRIIIMI] WIS Yuri Vial\" Revenues Product 830.395 832.0\" 346.834 Services and maintenance 61.662 56.920 53.013 Total revenues 92.05? 83.994 103.84? (ost of Revenues Product S 45239 3 5AM 3 5.3?\" Services and maintenance 29.105 29.675 32.023 mnizatidn ofpurchased product righls 3311 668 1.136 Tdtal onscairevenues 33.?28 35.621 33.680 Gross prot 53.329 53.1?0 65.26? Operating expenses Sales and marketing 26.322 34.985 44.128 Research and development \".266 22.666 26.151 General and administradnve 12.569 13.143 H.340 Impairment ofpurchased product rights 1.2211 Restrucmringcharges and adjustments 13.6?3 (1.169! Tdtal operating expenses 56.15? 35.7191 31.9513 Incdrne [less] from operations 2.1?2 (32.62]! (16.633! Other income iexpense] Interest income 1.261 1.660 3.3% Foreign exchange gain [less] '29 [431! 6'2! Loss from equity ineeslments (1.201: [693! [692! Realized loss on investments [310! Write-dorm oFang-lerln strategic investments (2.?80! (1.238! Tdtal other income {expense} 609 (2.124! 1.0311 Incdme [Ides] before income taxes and minority interest 2.631 (34.9%: (16.649! Noncontrolling interest in subsidiary 4 Income (loss! before income taxes 2.665 (36945! (16.649! Provision for incdme cases 1.061? 418 1.268 Net irvcdme (loss) $ 1.638 585.263! 5(1 6.91?! Calculate the sustainable ean'lings ofEntmsr. Inc. foreach dfthethree years. Remembertd use negativesigns with answers. when apprdpriate. Talc 3 You 2 War 1 Permanentearningss D gs *3 D