Earnings quality compares accounting net income with operating cash flow (CFO) to measure whether reported profits translate into real liquidity. High profit without equivalent cash generation may point to uncollected revenue, accounting manipulation or overvalued assets. By contrast, high earnings quality shows that the business generates solid, sustainable cash. It is a key ratio for spotting gaps between accounting profitability and real profitability, especially useful for investors and auditors.

• ≈ 1 → profit backed by cash (quality earnings).
• < 1 → part of the profit has not been collected or depends on accounting adjustments.
• > 1 → more cash is generated than profit, a sign of prudence or high depreciation and amortisation.

• CFO
• Simple cash flow
• EBITDA
• Overall solvency