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- Do financial statements and other filings allow us to understand the reality of the company’s unique business fundamentals, competitive edge and ability to generate free cash flow? Does company management engage in conservative or aggressive accounting practices? Is all material information necessary to evaluate the company properly disclosed?
- We define a high quality of earnings by how realistically we believe a company’s financial statements portray what is taking place within the business and how accurately the financial statements characterize the sustainability of the company’s earnings from operations.
- In our opinion, most companies engage in some type of earnings management.