Question:
Explain what is meant by the term earnings quality.
Answer:
The term earnings quality refers to the ability of reported earnings (income) to predict a company’s
future earnings. After all, an income statement simply reports on events that already have occurred. The
relevance of any historical-based financial statement hinges on its predictive value.
Explain what is meant by the term earnings quality.
Answer:
The term earnings quality refers to the ability of reported earnings (income) to predict a company’s
future earnings. After all, an income statement simply reports on events that already have occurred. The
relevance of any historical-based financial statement hinges on its predictive value.
