- CFA Exams
- CFA Level I Exam
- Study Session 9. Financial Reporting and Analysis (4)
- Reading 29. Financial Reporting Quality
- Subject 1. Reporting Quality and Results Quality
CFA Practice Question
High earnings quality is most likely to ______
A. indicate that lots of cash flows will be generated in the future.
B. indicate the firm is growing fast.
C. help analysts predict future earnings.
Explanation: The main goal of high earnings quality is to better forecast future company performance.
User Contributed Comments 2
| User | Comment |
|---|---|
| elbaker | Hahaha, nothing will help with analyst earnings estimates. Multiple studies throughout many time periods have routinely shown that sell-side analysts have a horrible track record of earnings predictions. |
| Shortseller | Not to mention that high earnings quality doesn't mean future good earnings... RIMM/MOT prime examples, lots of FCFF till their products were obsolete. |