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When evaluating earnings quality, a sustainable rise in operating cash flow accompanying earnings growth is generally regarded as:
AA red flag of aggressive revenue recognition
BIndicative of working-capital deterioration
CNeutral with respect to fundamental health
DEvidence of robust earnings quality
Answer & Solution
Correct answer: D. Evidence of robust earnings quality
1. Identify what the question asks: this concept maps to earningsquality (§1.4).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (D).
_Source: ICAI BoS CA Final Paper 2, Ch 4 "Security Analysis"_
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