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Quality of Earning1 - Quality of Earnings ,'searningsisof .

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Quality of Earnings In evaluating the financial performance of a company, the quality of a company's earnings is of  extreme importance to analysts. A company that has a high  quality of earnings  provides full and  transparent information that will not confuse or mislead users of the financial statements. The issue of quality of earnings has taken on increasing importance because recent accounting  scandals suggest that some companies are spending too much time managing their income and not  enough time managing their business. Here are some of the factors affecting quality of earnings. ALTERNATIVE ACCOUNTING METHODS Variations among companies in the application of generally accepted accounting principles may  hamper comparability and reduce quality of earnings. For example, one company may use the FIFO  method of inventory costing, while another company in the same industry may use LIFO. If inventory  is a significant asset to both companies, it is unlikely that their current ratios are comparable. For 
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