Exercise D12-7 (Essay)

Martha Bennett recently inherited $100,000 from her grandmother and is evaluating several investment opportunities. One company she is looking at is Keating Genomics, a company in the health care industry. To satisfy an assignment in her managerial accounting course, Martha has decided to prepare an analysis of Keating using ratio analysis. During her analysis, she discovers that the company sold its ownership interest in MedRegs in 2016. Keating has reported the results of these operations in the income statement under discontinued operations. A portion of Keatings adapted income statement (in $000) follows.

		2016		2015
Net income from continuing operations		$899		$4,593
Income (loss) from discontinued operations		4,482		(433)
Net income		$5,381		$4,160

Which income amount should Martha use when she calculates ratios that involve net income? Why?