A company whose net income is highly correlated to its operating cash flows is said to have a high quality of earnings.

Question

Quizplus · Accepted Answer

If a company's net income and operating cash flows are highly correlated, it indicates that its earnings are based on actual cash generated from its operations, which is considered a high quality of earnings. This means that the company is not relying on non-operating, one-time or unusual items to boost its earnings, which may provide temporary or unreliable increases in net income.

A Company Whose Net Income Is Highly Correlated to Its