Any Tips for Earnings Quality?

CFA Level II FRA
#1

This seems to be one of my weaker areas. Any tips or important things that you guys think everybody should know? Thanks.

#2

I would look at accruals ratios (BS and CF), general revenue recognition practices, expense recognition, the financial situation the firm is in (e.g. if in distress or not satisfying bond covenants, perhaps more motivation for management to manipulate earnings). These are just a few things to watch for but questions on EM tend to be more contextual, so I would adapt accordingly.

#3

#next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } That one is not too hard, I would work through the End of Chapter questions one or twice, it forces you to understand the concept. As Ariel mentioned above remember what are the motivation for management to manipulate the earnings and try to remember the different warning signs.

If an items sets shows up in the exam on the topic, I reckon it can be easily (and quickly) answered (if you practice a bit) then you’ll be able to spend more time on other items set.

#4

#next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } Sorry I don"t know why this shows up before my post

#next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; }

#next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; }