Few hours from now, $KBH will show its financial performance. A company may report high earnings but actually have low cash flows. This difference is called " accruals", which represents a firm’s estimation of future financial benefits and obligations. The estimation, however, may have errors. Some companies can even use accruals to manipulate their earnings. As a result, accruals may not be fully realized, leading to high accruals associating with low subsequent cash flows. Accordingly, two companies that have the same level of reported earnings, the one with high accruals is more likely to have lower profitability next year. For details, see: financial-education-hub.com.... If you want to estimate the quality of $KBH’s earnings to be released, you can calculate its accruals level, and the portion that may not be able to be realized in cash flows. For the method, please see: financial-education-hub.com....
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