What is the importance of assessing the earnings quality of a bank? In doing the assessment, what are the major things you would be looking for?
What is the importance of assessing the earnings quality of a bank? In doing the assessment, what are the major things you would be looking for?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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What is the importance of assessing the earnings quality of a bank? In doing the assessment, what are the major things you would be looking for?
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The capacity of reported profits (income) to anticipate a company's future profitability is referred to as earnings quality, also known as quality of earnings (QoE) in accounting.
[1] It is a criterion for determining how "repeatable, controllable, and bankable" something is.
[2] A firm's earnings are described as the degree to which profits reflect underlying economic consequences, are better projections of cash flows, are cautious, or are predictable, among other things.
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