Examlex
a.Describe earnings quality.
b.How is knowledge of earnings quality helpful in the analysis of financial statements?
Degree of Financial Leverage
This metric quantifies the sensitivity of a company's earnings per share to its fluctuations in operating income, based on the structure of its capital.
Net Income
Represents a company's total earnings, reflecting the amount of revenue that remains after all operating expenses, taxes, and preferred stock dividends have been deducted.
Interest Expense
The cost incurred by an entity for borrowed funds, often expressed as a periodic payment of interest on debt.
Unlevered Cost
The cost of funding a project or investment without taking into account the effects of leverage, reflecting the cost of equity.
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