Read Judgment Case 4-1 and answer it, considering also the biblical implications of this situation.
Judgment Case 4-1 Earnings quality
1. Define the term earnings quality
2. Explain the distinction between permanent and temporary earnings as it relates to the concept of earnings quality.
3. How do earnings management practices affect the quality of earnings?
4. Assume that a manufacturing companyâ€™s annual income statement included a large gain from the sales of investment securities. What factors would you consider in determining whether or not this gain should be included in an assessment of the companyâ€™s permanent earnings?
In today’s economic environment, which of the five steps in the strategic planning process do you think is the most important? Give an example of an industry where this would be the most important step. Do you think that a different industry might place more emphasis on another step in the strategic planning process? Why?