As transitory or value-irrelevant components become a larger part of a firm's reported earnings,which of the following effects would you not expect to witness?

Question

Quizplus · Accepted Answer

As transitory or value-irrelevant components become a larger part of a firm's reported earnings, the quality of those reported earnings is eroded, reported earnings become a less reliable indicator of the company's long-run sustainable cash flows, and earnings are a less reliable indicator of the firm's fundamental value. However, the firm's stock price rising in the year such components are reported proportionate to their impact on income is not necessarily expected or guaranteed. The stock price could be influenced by other factors as well, such as market trends, investor sentiment, or future growth prospects.

As Transitory or Value-Irrelevant Components Become a Larger Part of a Firm's