Question

1. If you want to invest in a particular stock, name key information you would seek out prior to making your investment.

2. Name some ways that top management might manipulate the financial statements of the business, to ensure that the year-end profitability looks good, thus attracts a big bonus for themselves.

Answer 1

Answer of this can be very

Answer No. 1T

Specifically asked in the question just to name key information so below are the points.

- Through Fundamental Analysis we can get the information we seek.

like

Financial Performance,

Debt-Equity Ratio (Low - Debt Free),

Growth of Company (Should be Consistant),

Unique product-services and Business Model (Compititive Advantage),

Managemnet Ethics and Morals,

Return on Investment,

Other Valuation Ratios (P/E, Book Value, Discounted Cashflow Etc)

History-Background of Management and Company (Track Record),

Free Cashflow,

Large Market Share(Size).

Answer No. 2

Top management might manipulate the financial statements of the business by below mentioned ways to ensure that the year end profitability looks good, thus attracts a big bonus for themselves.

1. by inflating revenue (Eg. holding back and one time large revenue recognition, Ficticious sales)

2. Recogition of Expenses to other period or delaying expenses

3. Financial Manipulation via merger and acquisition

4. Off balancesheet items