The term quality of earnings refers to ________.
A) how well reported earnings conform to GAAP
B) the realism and sustainability of reported earnings
C) whether actual earnings matched expected earnings
D) how well reported earnings fit a trend line of earnings growth

Question

Quizplus · Accepted Answer

Quality of earnings refers to how realistic and sustainable the reported earnings are, which includes factors such as proper accounting practices and the company's ability to continue generating earnings over the long term. Option A refers to adherence to accounting standards, option C refers to earnings expectations, and option D refers to the trend of earnings growth, none of which fully capture the concept of quality of earnings.

The Term Quality of Earnings Refers to ________