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Quality Factor

Worried about your companies’ financial health? Consider the Quality Factor.

When used as a noun, "quality" describes how good or bad something is. However in common usage, the word "quality" is only associated with good things, and it is most frequently used to mean "high quality." A "quality company" is taken to signify a high-quality company, while a "quality product" is taken to mean a high-quality product. The one thing that distinguishes quality from all the other characteristics is that it is unrelated to the stock's current market price. It largely depends on non-market data, often the periodic financial reports issued by businesses.

Utilizing criteria such as profitability, earnings stability and growth, leverage, assets and investments, accruals and cash flows, among others, the Quality factor assesses the financial and accounting quality of businesses.

It follows logically that knowledgeable and rational investors are prepared to pay a premium for enterprises that have several of the qualities described above. This is also known as the "Quality Effect" or "Quality Premium," and it denotes the potential for high-quality equities to outperform their inferior counterparts over extended periods of time.

What is ‘Quality’ Investing?

As a noun, the quality of an item refers to how good or bad it is. In popular usage however, the word "quality" has retained only positive connotations being used most often as a simile for "high quality".

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How is ‘Quality’ Defined?

Both academicians and practitioners have strived to gauge the 'quality' of companies in various ways over the years. However, the use of quality as a factor is quite recent with a large proportion of academic literature pertaining to

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What is ‘Quality’ Investing?

As a noun, the quality of an item refers to how good or bad it is. In popular usage however, the word "quality" has retained only positive connotations being used most often as a simile for "high quality".

Read More
How is ‘Quality’ Defined?

Both academicians and practitioners have strived to gauge the 'quality' of companies in various ways over the years. However, the use of quality as a factor is quite recent with a large proportion of academic literature pertaining to

Download E-Book