Question #13
Reading: Reading 12 Evaluating Quality of Financial Reports
PDF File: Reading 12 Evaluating Quality of Financial Reports.pdf
Page: 10
Status: Incorrect
Correct Answer: A
Your Answer: C
Question
Mean reversion in earnings means that:
Answer Choices:
A. Extreme high earnings will revert to the mean but extreme low earnings will not
B. Extreme high as well as low levels of earnings will revert to the mean
C. Extreme low earnings will revert to the mean but extreme high earnings will not
Explanation
Mean reversion in earnings means that extreme high or low earnings are not sustainable
and will mean revert.