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The Quality of a Company's Earnings Refers to the Substance

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The quality of a company's earnings refers to the substance of earnings and their sustainability into future accounting periods.


Definitions:

Controllable Margin

A measure of profitability that represents the amount of revenue left after deducting all controllable expenses.

ROI

Return on Investment, a performance measure used to evaluate the efficiency or profitability of an investment relative to its cost.

Controllable Margin

The portion of profit or loss that can be directly controlled or influenced by management decisions.

Average Assets

The average value of a company's assets over a specific period of time, used in calculating metrics such as return on average assets (ROAA).

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