Earnings quality

Earnings quality is a composite assessment of how reliable reported earnings are as a predictor of future cash flow. It is not a single metric but a battery: OCF/NI conversion, the accruals ratio (Sloan's classic), the Beneish M-Score, the tax-rate trajectory (sudden tax-rate drops are suspect), and the consistency of one-time charges (a company that takes a 'one-time' charge every year is really running a structural-cost line). These checks identify issues that need explanation in the analysis. Accounting concerns inform the discussion of earnings, cash flow and risk; the rating itself follows current price relative to house fair value.