quality of earnings


Also found in: Acronyms.

Quality of earnings

Increased earnings due to increased sales and cost controls, as compared to artificial profits created by inflation of inventory or other asset prices.

Earnings Quality

A condition describing how earnings are recognized. Earnings of high quality are attributable to conservative accounting standards and/or strong cash flows. Low quality earnings come from artificial sources, such as inflation or aggressive accounting. For example, a publicly-traded company may claim strong earnings and consequently have a high stock price. However, the company may have low cash flow from operations and the strong earnings may come mainly from the accounting structures it uses. Therefore, its stock is overvalued. Quality of earnings ratings is subjective, but it does take into account matters such as corporate governance, inventory to sales ratios, and other factors.

quality of earnings

See earnings quality.
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References in periodicals archive ?
The authors have proposed a uniform, independent definition of quality of earnings that allows for the development of an Earnings Quality Assessment (EQA) model.
Earnings quality: it's time to measure and report
The authors assert that there is a need for a measure in accounting that can be used to accurately assess the quality of earnings reported by public companies on financial statements.
A model for determination of the quality of earnings
Larger discretionary accruals indicate a tendency to manage earnings, thus suggesting a lower quality of earnings.
Auditor industry specialization and earnings quality
In this paper, we argue that quality of earnings can serve as a productive framing device and a unifying theme in curriculum design and learning in Intermediate Financial Accounting, and that such a construct has several desirable pedagogical features.
"Quality of Earnings" as a framing device and unifying theme in Intermediate Financial Accounting
This is why we consider this subject so important that we are featuring a special report in this CPA Letter on Quality of Earnings, to communicate to all our members on their role in this process, whether they are part of the preparer, auditor, regulatory, government or academic communities.
A Message from the President
Greene King said retail sales had moved into positive territory and the aim now was to drive the enlarged estate forward and improve the quality of earnings.
Profits crown Greene King's year of growth
Travellers is confident in its ability to deliver sustainable growth, and shall continue to focus on delivering quality of earnings to its shareholders through the top line growth in revenues and expense management leading to continued expansion in its EBITDA (earnings before interest taxes, depreciation and amortization) and net income," Sian added.
Resorts World Manila operator nets P5.45B
Analysis of key red flags at individual banks shows that the most worrying are asset quality, quality of earnings and corporate governance.
ATON - RUSSIAN BANKS: The Lemons Problem - Nov 9, 2011
The review will focus on the company's operating and strategic direction as well as the quality of earnings, ongoing industry pressures (notably regarding Commercial payors) and liquidity.
Moody's examines Diagnostic Imaging Group for rating cut
In order to sharpen Shuaa's quality of earnings going forward, we have taken decisive steps to improve the balance sheet, significantly increase liquidity and eliminate further downside risks emanating from non-fee-generating businesses,' said Shuaa's chief executive, Sameer al Ansari.
Dubai's Shuaa Capital narrows loss in third quarter

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