Quality of earnings
| Order ID |
53563633773 |
| Type |
Essay |
| Writer Level |
Masters |
| Style |
APA |
| Sources/References |
4 |
| Perfect Number of Pages to Order |
5-10 Pages |
Description/Paper Instructions
Quality of earnings
Quality of earnings (QoE) refers to the ability of reported earnings to predict a company’s future earnings. In other words, it is a measure of how sustainable a company’s earnings are. QoE is important for investors because it helps them to assess the riskiness of an investment.
There are a number of factors that can affect QoE, including:
The use of accounting methods that are favorable to earnings. For example, a company may use accelerated depreciation to write off assets more quickly, which can boost earnings in the short term. However, this can also lead to lower earnings in the long term.
The occurrence of one-time events, such as the sale of an asset or the write-off of a liability. These events can boost earnings in the short term, but they do not reflect the company’s underlying profitability.
The level of debt. A company with a high level of debt will have to make regular interest payments, which can reduce its earnings.
The level of competition. A company that operates in a competitive industry will have to invest more in research and development and marketing, which can reduce its earnings.
How to assess QoE
There are a number of ways to assess QoE. Some of the most common methods include:
Analyzing the company’s income statement and cash flow statement. This will help to identify any unusual or one-time items that may be distorting earnings.
Comparing the company’s earnings to its industry peers. This will help to assess whether the company’s earnings are in line with what is considered to be normal for its industry.
Analyzing the company’s debt levels. A high level of debt can be a sign that the company is struggling to generate enough cash flow to cover its expenses.
Analyzing the company’s competitive environment. A competitive environment can make it difficult for a company to maintain its profit margins.
The importance of QoE
QoE is important for investors because it helps them to assess the riskiness of an investment. A company with high-quality earnings is more likely to be able to sustain its earnings in the future, which means that it is a lower-risk investment. Conversely, a company with low-quality earnings is more likely to experience a decline in earnings in the future, which means that it is a higher-risk investment.
How is QoE used in M&A deals?
QoE is often used in mergers and acquisitions (M&A) deals. In an M&A deal, the buyer is essentially buying the company’s future earnings. Therefore, it is important for the buyer to understand the quality of the company’s earnings before making an offer.
A quality of earnings report (QoE report) is a detailed analysis of a company’s earnings. The QoE report will typically identify any unusual or one-time items that may be distorting earnings, and it will compare the company’s earnings to its industry peers. The QoE report will also analyze the company’s debt levels and competitive environment.
The QoE report is an important part of the due diligence process in an M&A deal. The buyer will use the QoE report to assess the riskiness of the investment and to determine how much it is willing to pay for the company.
Conclusion
QoE is an important concept for investors to understand. By assessing QoE, investors can get a better understanding of the riskiness of an investment and can make more informed investment decisions.
In addition to the methods mentioned above, there are a number of other factors that can be considered when assessing QoE. These factors include the company’s management team, its business model, and its competitive landscape. By taking all of these factors into account, investors can get a more complete picture of the quality of a company’s earnings.
Quality of earnings
|
RUBRIC
| QUALITY OF RESPONSE |
NO RESPONSE |
POOR / UNSATISFACTORY |
SATISFACTORY |
GOOD |
EXCELLENT |
| Content (worth a maximum of 50% of the total points) |
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30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. |
40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. |
50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. |
| Use of Sources (worth a maximum of 20% of the total points). |
Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. |
5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. |
10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. |
15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. |
20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. |
| Grammar (worth maximum of 20% of total points) |
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5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors |
10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors |
15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. |
20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. |
| Structure of the Paper (worth 10% of total points) |
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7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. |
10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. |
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