Profit Quality Analysis System For Study

On account of the continuously emerged circumstances on accountingfraud, profit quality has been becoming one of the focuses of stakeholders.Presently, investigations on profit quality mainly focus on three aspects: (i)investigations grounded on market information, (ii) investigations groundedon cash flows and (iii) investigations grounded on profit structure and profitpersistence. However, no studies show us one completely analysis system forprofit quality, which can be widely applied. According to theories such asviews of quality of financial condition, views of balance of financial conditionand the theory administration levels of financial analysis, this paper buildssuch a system for profit quality, by ways of defining profit quality, describingthe measuring methods, and discussing its exertion. The analysis systemincludes the follows: Profit quality should be described from twoaspects--quality and quantity, this means earnings' level, structure, the cashingability, results and persistence of the profit in details;Qualified index andquantified index are designed to evaluate profit quality;Meanwhile, the paperforms one model—perspective model from quality of financial conditions tomanagement activities—to find problems consist in management. We alsobuild the relationship between various aspects of profit quality andcorresponding management activities. In the end, we do some empirical teststo demonstrate the application of the analysis system, and find it consistentwith the fact.