115 CFA
File: Financial Analysis - Reading 29 - 1. Reporting Quality and Results Quality

1. Reporting Quality and Results Quality

a. distinguish between financial reporting quality and quality of reported results (including quality of earnings, cash flow, and balance sheet items);

What is financial reporting quality?
A subjective evaluation of the extent to which financial reporting is free of manipulation and accurately reflects the financial condition and operating success of a company.

What is earnings quality?
Earnings are considered to be high quality if they exhibit persistence and are unbiased. Sustainable earnings enable better forecasts of future cash flows or earnings.

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