Earnings are important because:

Question

Quizplus · Accepted Answer

All of the choices A, B, and C are correct.

A) Earnings are used in determining cash flows, which are important in predicting future financial performance and potential growth of a company.

B) When a company shows an increase in earnings, it is an indication of growth and potential profitability which results in appreciation of equity value.

C) Earnings are a major factor in evaluating management performance. High earnings can indicate effective management of the company, while low earnings can indicate poor management which might affect investor confidence.

Thus, it can be concluded that all of the above options are important and interlinked, making option D the correct choice.

Earnings Are Important Because