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earnings quality

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earnings quality
The extent to which a firm's reported earnings accurately reflect income for that period. Firms using conservative accounting practices tend to penalize current earnings and are said to have high earnings quality. At least over the short run, the earnings reported by a firm are as much a function of its accounting methods as they are a measure of its business success. Also called quality of earnings. See also inventory profit.


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Because the push for mandatory auditor rotation stems from the belief that extended auditor tenure impairs auditor independence, we decided that the relation between auditor tenure and earnings quality is central to the debate," explains Myers.
In a July 21 report, Wold expressed concern about the shares' valuation prospects due to poor earnings quality, a decline of consensus estimates and increased risk of operating margin pressures throughout this year.
Detailed footnotes on earnings help clarify earnings quality
 
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