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Reported earnings are accounting measurements. Their investment meaning depends on cash, recurrence, capital needs, and the claims shared across owners.
How can earnings growth lack operating support?
Profit can rise through accruals, reserve changes, tax effects, asset sales, fair-value movements, acquisition accounting, capitalization, or a weak comparison rather than stronger recurring operations.
How does the accrual-dependence screen work?
The Apparent Profitability, Structural Accrual Dependence panel requires favorable profitability evidence to coexist with accrual-related observations. A match raises a cash-conversion question; it does not prove aggressive accounting.
Depreciation-Heavy Reported Profit
Net profit margin is positive while depreciation is large relative to operating cash flow
How does the one-time inflation screen work?
The Apparent Quality, Structural One-Time Inflation panel pairs quality-like readings with observations consistent with one-time profit support. A match requires line-item review to identify what actually occurred.
High ROE With Large Non-Operating Gap and Elevated-Margin-With-Deceleration
Return on equity is high while the absolute gap between pretax and operating income is large relative to sales and EBIT margin is above its historical median with decelerating growth
How do you reconcile earnings with cash?
Bridge net income to operating cash, separating receivables, inventory, payables, provisions, taxes, stock compensation, depreciation, and other non-cash items. IAS 7 provides the cash-flow framework.
What records reveal non-recurring profit?
Inspect gains, impairments, restructuring, acquisition effects, discontinued operations, tax changes, estimates, and non-GAAP reconciliations. Compare several years and segments.
When should you combine the two earnings conflicts?
Use the conflict matching the suspected mechanism; combining both uses AND logic. Zero results are universe limited. The panels cannot establish fraud, recurrence, future cash, or valuation.