A higher quality of earnings ratio indicates that it is less likely that the company is using aggressive revenue recognition policies to increase profit.

Question

Quizplus · Accepted Answer

This statement is true. A higher quality of earnings ratio indicates that the company's earnings are more sustainable and less likely to be distorted by accounting manipulations, such as aggressive revenue recognition policies. Higher quality of earnings ratios suggest that the company's reported earnings are more reliable and reflect the underlying performance of the company.

A Higher Quality of Earnings Ratio Indicates That It Is