Advance Of Connotation And Analyses Of Quantified Index Of Earnings And Quality Of Earnings

The most important practical problem is issue of earnings caused by different opinions on earnings and quality of earnings from various delamination. Starting with connotation and advance of earnings, people often treat economic income as ideal income. However, it is not easy to quantify. Accounting income is charactered by following the rule of historic cost, income and cost matched and wariness. Compared with economic income, accounting income can be validated easy, so it has practicality. But when faced with new economic age, traditional theory of accounting income is too old to reflect the truth quickly and correctly. Responding to this new circumstance, the theories of "Economic Value Added" and "Comprehensive Income" are developed. EVA equals the balance between NOPAT and capital cost. EVA has solved the problem of quantity. And comprehensive income not only include the accounting income, but measure earnings which has affirmed and unrealized such as earnings caused by the change of price or of other environmental conditions. Therefore this theory can show the whole change of net assets during the reported period. With the theory of EVA and comprehensiveincome, it shows that the distance of economic income and accounting income became shorter on the one hand, while that people pay more attention to the issue of quality of earnings.According to the understand of earnings and quality of earnings, we probe into interior quality of earnings from three different delamination. The first delamination is about the magnitude of economic income, which include the level of income, the form of income, the sensitivity of income and the increasing ability of income. The second delamination is about objectivity of differentia accounting income and economic income caused by the bug of accounting system itself. For example earnings management is one of the ways to adjust the earning (play number games) which is probably far from the truth to satisfy the manager though the action is under the rule. The Third delamination is about fake income caused by person on purpose. Some companies are against neutral operation or make up unreal income.Quantified analysis is a new means to estimate earnings and quality of earnings in recent years, in addition to the ways of qualitative analysis such as distinguishing "red flags" . The usual way is to select indexes and compare the result to the standard by single index or integrated scores. We propose to build a set of indexes, chosen from three different delamination, which can represent the main elements. These indexes can reflect the level of income, the stability and ability of growth, avoiding the limitation of accounting rules, marking the poor quality of earnings. After calculating these indexes, combining qualitative analysis, we can acquire the status of the quality, then we have reasons to improve quality of earnings.