- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 13. Analysis of Financial Institutions
- Subject 2. Analyzing a Bank: The CAMELS approach
CFA Practice Question
In general, high-quality earnings mean:
II. the earnings are derived from sustainable rather than non-recurring items.
I. accounting estimates are unbiased.
II. the earnings are derived from sustainable rather than non-recurring items.
Correct Answer: I and II
The quality and trend of earnings of an institution depend largely on how well the management manages the assets and liabilities of the institution. A financial institution must earn reasonable profit to support asset growth, build up adequate reserves and enhance shareholders' value.
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