CFA Practice Question

There are 86 practice questions for this study session.

CFA Practice Question

High-quality earnings are, by definition, ______.

A. repeatable
B. accurate
C. conservative
Correct Answer: A

Income statements displaying high earnings are considered high quality only if these earnings are repeatable; that is to say, the high earnings are not due to artificially low costs. High-quality earnings result from the use of conservative accounting principles that do not result in overstated revenues or understated costs.

User Contributed Comments 6

User Comment
Naufil2004 Why is the last choice incorrect?
Gina conservatism is an accounting concept by which you present your results with the least favorable figures. you can report conservatively, but run your business in such a way that your earnings wildly fluctuate from year to year (in which case they would not be considered of high-quality).
chenyx High-quality earnings are repeatable,and result from the use of conservative accounting priciples that do not result in overstated revenues or understated costs.
olagbami yeah right
vatsal92 It is High-quality only if it's repetitive.
tunjihpmtd yeah .correct
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