Earnings are extremely important to a publicly traded company and the creditors and investors of that company. However, looking at earnings without regard to the quality of those earnings is hazardous to the health of creditors and investors.

1. Why is the determination of earnings quality and persistence important?
2. Explain recasting of the income statement, and give three examples of items that are recasted.
3. Explain adjusting of the income statement, and give three examples of items that are recasted.