Quality Of Earnings

AAA

DEFINITION of 'Quality Of Earnings'

The amount of earnings attributable to higher sales or lower costs rather than artificial profits created by accounting anomalies such as inflation of inventory.

INVESTOPEDIA EXPLAINS 'Quality Of Earnings'

Quality of earnings is considered poor during times of high inflation. Also, earnings that are calculated conservatively are considered to have higher quality than those calculated by aggressive accounting policies.

RELATED TERMS
  1. Cookie Jar Accounting

    A disingenuous accounting practice in which periods of good financial ...
  2. Earnings Management

    The use of accounting techniques to produce financial reports ...
  3. Earnings

    The amount of profit that a company produces during a specific ...
  4. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  5. Inherent Risk

    The risk posed by an error or omission in a financial statement ...
  6. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
Related Articles
  1. The 5 Types Of Earnings Per Share
    Markets

    The 5 Types Of Earnings Per Share

  2. Everything Investors Need To Know About ...
    Insurance

    Everything Investors Need To Know About ...

  3. How To Evaluate The Quality Of EPS
    Markets

    How To Evaluate The Quality Of EPS

  4. Variable Costs
    Investing

    Variable Costs

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center