do they have sure link with each other? or what is the best way to present this?
conservative accounting does not necessarily mean quality earnings… sometimes you can be too conservative…
so can we say they dont have direct relationship with each other?
yes… i have seen a couple of questions where they put a conservative accounting in the answer to which of one of these signals quality earnings… it might be a trick, or could be the real answer if the other 2 answers really suck… these questions are very subjective, but dont automatically assume that conservative is best (it may be, just dont assume it, evaluate all answer choices)
If you’re are too conservative, say for example depreciation is excessive, eventually your earnings will go up and you could realize a gain on equipment if you sold it - the point is the earnings won’t be accurate. Earnings quality means earnings that are persistent and accurate. Overshooting on both sides is bad.
I think Earning quality means how the figures are indicative of future earnings in the long term. I think conservative accounting lacks that predictability.