A firm that has a level of earnings consistently above their cost of capital benchmark is said to have:
a) A consistent, competitive advantage.
b) A golden unicorn.
c) Positive Abnormal Earnings.
d) Negative Abnormal Earnings."

The correct answer to the question is option C

POSITIVE ABNORMAL EARNINGS

Explanation: Any firm potential earnings is generally influenced by the kind of resources in the form of net assets that is available to its management and its ability to generate a profit that is the l return from such assets

Positive abnormal earnings can simply be defined as those earnings by a firm or organization that is higher or above the expected return.

Every firm or organization has an objective and a goal they work towards to meet,when those objectives are not met,it becomes a problem and setback to the firm but when it is met/achieved,it pilots the affairs of the firm, an abnormal earnings valuation technique entails evaluating the worth of a company, organization or firm based on two factors, that is the book value of the company and its expected earnings. The valuation model looks at the expected profit that can be generated by the management of the firm or organization.when the earnings are higher than the expected returns,it is termed positive earnings and when the return are less than expected return,they are known as negative abnormal earnings.

Advantages are,there is alignment with what market/analyst forecast, there is incorporation with the financial statements,shows quality of the management,focus on value drivers and maximization of shareholders’ wealth

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