Question

In: Accounting

State and explain two motivating factors for corporate management for the earnings management

State and explain two motivating factors for corporate management for the earnings management

Solutions

Expert Solution

Earnings management is defined as the use of the accounting technique to show a financial statement that shows a positive view of business activities of a company. In simple terms it is a method of manipulating a company's financial records. It is done to have a good appearance of a company financial position. With it companies show consistent profits and a smooth earning.

Two motivating factors for corporate management for the earnings management are:

  • Preference for more stable earnings: Earning management involves manipulating the company's earnings so that pre-determined target can be earned. By using this company's can show a stable earning to show that management is carrying out income soothingly.
  • Need to maintain the level of certain accounting ratios: Another factor is that the companies need to maintain the ratios at certain level so as to show that the company is in good shape. A company needs to maintain the level of certain accounting ratios due to its debt covenants, etc. Also there is pressure on the companies to have and maintain an earning that is increasing and also to beat the target set by various analyst.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Explain the earnings management continuum Briefly discuss the motivating factors for earnings management Briefly explain the...
Explain the earnings management continuum Briefly discuss the motivating factors for earnings management Briefly explain the five accounting hocus-pocus widely used to make numbers, based on the speech delivered at the NYU Center for Law and Business by SEC Chairman Arthur Levitt
State two (2) disadvantages of earnings management from the stakeholders’ point of view
State two (2) disadvantages of earnings management from the stakeholders’ point of view
Evaluate the environmental factors that contribute to corporate management’s need to manage corporate earnings to align...
Evaluate the environmental factors that contribute to corporate management’s need to manage corporate earnings to align with market expectations, indicating the potential long- term risks to financial performance and sustainability.
"Managing Corporate Earnings" Please respond to the following: Evaluate the environmental factors that contribute to corporate...
"Managing Corporate Earnings" Please respond to the following: Evaluate the environmental factors that contribute to corporate management’s need to manage corporate earnings to align with market expectations, indicating the potential long- term risks to financial performance and sustainability. Assess the ethical complexities related to managing corporate earnings, determining whether or not investors and stakeholders are accepting of this behavior. Assuming that you are in a position to make corporate financial decisions, how likely are you to engage in earnings management...
- Explain the main motivating factors behind The Protestant Reformation. Please include Martin Luther's criticisms of...
- Explain the main motivating factors behind The Protestant Reformation. Please include Martin Luther's criticisms of the Catholic Church, and John Calvin's ideas during this time.
In terms of the factors motivating a firm entering into an M&A, which of the following...
In terms of the factors motivating a firm entering into an M&A, which of the following is true? a. Smaller firms are more willing to pursue an M&A because it limits their financial exposure. b. In high-risk environments, firms are less likely to want to commit resources necessary for an M&A. c. Managers like M&As in entering developing countries if the systematic country risk is high. d. M&As are a good way to test a new market and to see...
What is the importance of motivating employees? Discuss the personal and contextual factors that have an...
What is the importance of motivating employees? Discuss the personal and contextual factors that have an impact on motivation. How might managers leverage these factors or combat them is they become an obstacle? What role does offering rewards play in motivating employees? Are they always helpful? human resource
Write a corporate management report in which you explore the factors that influence the valuation of...
Write a corporate management report in which you explore the factors that influence the valuation of the equity of a company. Be sure your report includes the following: Assume the CAPM is used to form the weighted average cost of capital (WACC). Form a discussion on the CAPM in which you describe each of the following issues. o Determine how diversification is important in the formation of the CAPM. The discussion should focus on the topics of total risk, systematic...
Write a corporate management report in which you explore the factors that influence the valuation of...
Write a corporate management report in which you explore the factors that influence the valuation of the equity of a company. Be sure your report includes the following: Assume the CAPM is used to form the weighted average cost of capital (WACC). Form a discussion on the CAPM in which you describe each of the following issues. o Determine how diversification is important in the formation of the CAPM. The discussion should focus on the topics of total risk, systematic...
MASTERING CORPORATE GOVERNANCE: WHEN EARNINGS MANAGEMENT BECOMES COOKING THE BOOKS There is often a blurred line...
MASTERING CORPORATE GOVERNANCE: WHEN EARNINGS MANAGEMENT BECOMES COOKING THE BOOKS There is often a blurred line between appropriate and inappropriate accounting techniques, but the audit committee must attempt to clearly distinguish which is which. The guiding principle of the audit committee is shifting from a focus on technical accounting procedures to determining whether disclosures in the financial reports present a true and fair view of the entity’s affairs. Companies often face a great deal of pressure to meet the earnings...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT