Letter to Editor

I have read through the story of capital allocation published in the previous issue and am extremely thankful for taking up such a crucial question popping up in the minds of most of investors. The discussion centres on one important aspect which is about assessing the quality of earnings. Can you elaborate regarding the basic requirements to look at while analysing quality of earnings for a company?
 - Vidyadhar Joshi

Editor Responds: We are glad to receive such positive feedback from your side regarding the cover story on asset allocation. High earnings’ quality is often considered to be evidenced by earnings that are sustainable and represent returns equal to or in excess of the company’s cost of capital. Hence, it is important to look for earnings that are persistent and recurring and are generated from the core operations of a company. Keep writing to us with further queries.