Quality of Earnings
- This topic has 1 reply, 2 voices, and was last updated 6 months, 3 weeks ago by Lynn Roden.
Regarding Question ID: ICMA 19.P2.070 (Topic: Inflation)
What is the definition of “Quality of Earnings” here? I don’t quite understand how choosing the inventory method that leads to the lowest income level would result in a higher quality of earnings. I would think that choosing FIFO, which would lead to greater income in a period of rising prices would lead to higher quality of earnings. The definition I found is: <b>Quality of earnings</b> is the percentage of income that is due to higher sales or lower costs. Any insight would be helpful.
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