Economic income is considered to be a better predictor of future cash flows than accounting income is.
accounting
Description
Case 5-2 Earnings Quality
Economic income is considered to be a better predictor of future cash flows than accounting income is. A technique used by securities analysts to determine the degree of correlation between a firm’s accounting earnings and its true economic income is quality of earnings assessment.
Required:
Discuss measures that may be used to assess the quality of a firm’s reported earnings.
Obtain an annual report for a large corporation and perform a quality of earnings assessment.
Please, include all references.
Thank you.
