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Quality of earnings is important for sustainable growth from "summary" of Security Analysis: Sixth Edition, Foreword by Warren Buffett by Benjamin Graham,David Dodd
The concept of quality of earnings is a crucial consideration for investors seeking sustainable growth in their investments. Earnings can be a misleading indicator if they are not of high quality, as they may not accurately reflect the financial health and future prospects of a company. High-quality earnings are those that are stable, consistent, and sustainable over the long term. One key aspect of quality earnings is the transparency and reliability of financial statements. Investors must be able to trust that the reported earnings are a true reflection of the company's performance and not the result of accounting gimmicks or manipulation. Companies with high-quality earnings are more likely to have transparent financial statement...
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