As transitory components become a more important part of a firm's reported earnings,the reported earnings:
A) are more quality enhanced.
B) become a more reliable indicator of sustainable cash flows.
C) are a less reliable indicator of sustainable cash flows.
D) are a more reliable indicator of fundamental value.

Question

As transitory components become a more important part of a firm's reported earnings,the reported earnings: 
A) are more quality enhanced.
B) become a more reliable indicator of sustainable cash flows.
C) are a less reliable indicator of sustainable cash flows.
D) are a more reliable indicator of fundamental value.

Quizplus · Accepted Answer

Transitory components are typically not sustainable and can lead to fluctuation in reported earnings, which makes them a less reliable indicator of sustainable cash flows.

As Transitory Components Become a More Important Part of a Firm's