In this paper, the application of a new optical microscopy method (quantitative phase-amplitude microscopy) to biological imaging is explored, and the issue of resolution and image quality is examined. The paper begins by presenting a theoretical analysis of the method using the optical transfer function formalism of Streibl (1985). The effect of coherence on the formation of the phase image is explored, and it is shown that the resolution of the method is not compromised over that of a conventional bright-field image. It is shown that the signal-to-noise ratio of the phase recovery, however, does depend on the degree of coherence in the illumination. Streibl (1985) notes that partially coherent image formation is a non-linear process because of the intermingling of amplitude and phase information. The work presented here shows that the quantitative phase-amplitude microscopy method acts to linearize the image formation process, and that the phase and amplitude information is properly described using a transfer function analysis. The theoretical conclusions are tested experimentally using an optical microscope and the theoretical deductions are confirmed. Samples for microscopy influence both the phase and amplitude of the light wave and it is demonstrated that the new phase recovery method can separate the amplitude and phase information, something not possible using traditional phase microscopy. In the case of a coherent wave, knowledge of the phase and amplitude constitutes complete information that can be used to emulate other forms of microscopy. This capacity is demonstrated by recovering the phase of a sample and using the data to emulate a differential interference contrast image.