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CASE 5-2 EARNINGS QUALITY Economic income is considered to be a better predictor of future cash flows than accounting income. A technique used by security

CASE 5-2 EARNINGS QUALITY

Economic income is considered to be a better predictor of future cash flows than accounting income. A technique used by security analyst to determine the degree of correlation between firms 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 firms reported earnings.

Obtain an annual report for a large corporation and perform a quality earnings assessment.

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