Answer: Company 2 only

## Explanation **Company 2** shows potentially poor reporting quality for the following reasons: - **Large and growing gap between earnings and operating cash flow**: This suggests aggressive accounting practices where earnings may be inflated through accruals that are not supported by actual cash generation. - **Constantly increasing difference**: A persistent and growing divergence indicates potential earnings manipulation or poor earnings quality, as sustainable businesses should show reasonable alignment between earnings and cash flows over time. **Company 1** actually shows **good** reporting quality: - **Low volatility in operating cash flow**: This suggests stable and predictable cash generation, which is a positive indicator of financial health and reporting quality. - **Consistency with industry**: Operating cash flow patterns that align with industry norms indicate the company is not using unusual accounting practices. The growing earnings-cash flow gap in Company 2 is a classic red flag for potential earnings management or poor earnings quality.

Author: LeetQuiz Editorial Team