What type of earnings quality relates to the sustainability of earnings?

The concept of earnings quality pertaining to sustainability of earnings primarily focuses on whether the earnings presented in financial statements can be expected to continue in the future. Permanent earnings refer to a company's earnings that are derived from its core operations and are likely to persist over time. This type of earnings is not influenced by one-time events or irregular activities, making it a reliable indicator of a company's ongoing profitability.

In contrast, temporary earnings are often derived from non-recurring transactions or one-off events that do not reflect the long-term business model. Cyclic earnings fluctuate with the economic or business cycles and may not provide a consistent outlook on future performance. Historical earnings refer to past performance and do not account for future expectations, thus lacking relevance for sustainability considerations. Hence, permanent earnings are considered superior when assessing the quality of earnings due to their reliability in forecasting future financial performance.