Computer companies who fraudulently report higher earnings would most likely also falsify which ratios and why?

Solutions

Expert Solution

Companies who fraudulently report higher earnings would most likely also falsify ratios that are related to higher earnings are as follows are Rerturn on Assets & Return on Equity.

Return on Assets : Net income / Average Total Assets.

ROA may be the most frequently cited measure of the success of firms. ROA can be used tto rank firms in the same industry. the higher the ratio, the greater the fir'ms sucess in making its total assets productive. As income rises and total asset stays the same, the ratio too increases, and the firm looks more successful. Hence Higher earnings would report to a increase in ROA.

ROE: Net income / Average Equity.

Net income is availble to common shareholders after deduction of all payments to bondholders and preferred shareholders. If a firm is successful, ROE should be greater than the cost of equity capital. Hence If the Net income is high, ROE would be high. Hence higher earnings would like to increase the ROE also. Higer ROE ratios suggest better returns for common stockholders.

ekkarill92 answered 10 months ago

Next > < Previous

Related Solutions

92. A patient who is in shock would most likely be placed in which of the...

92. A patient who is in shock would most likely be placed in which of the following positions? * a. Prone b. Trendelenburg c. Knee-chest d. Semi-Fowler’s 93. What is the term for a condition that occurs when a rectal temperature is 104°F or above? * a. Cyanosis. b. Hyperpyrexia. c. Vasoconstriction. d. Vasodilation. 94. When recording fluid output, you should write down the total amount of output from * a. urine only. b. emesis only. c. loose stool only....

Which types of companies would most likely use a process costing system?

Which types of companies would most likely use a process costing system? Provide examples of two Saudi Compagnies.Explain the methods with which the cost per unit will be calculated for this type of companies. Explain how the different items of inventory will be evaluated?

Which types of companies would most likely use a process costing system and which types of...

Which types of companies would most likely use a process costing system and which types of companies would use job costing? Provide examples of two Saudi Companies. Explain the methods with which the cost per unit will be calculated for each type of company using numerical example

Physiology of Exercise 11. An elite powerlifter would most likely have a higher percentage of which...

Physiology of Exercise 11. An elite powerlifter would most likely have a higher percentage of which fiber type? 12. Explain blood glucose homeostasis during exercise. Talk about the hormone involved and the actions they take to control our blood glucose. 13. How do athlete's differ from the general population in hormone and receptor number. 14. What are some of the common fare markers (fats & triglycerides) that are seen in a blood test and what do they mean and how...

4 Which types of companies would most likely use a process costing system and which types...

4 Which types of companies would most likely use a process costing system and which types of companies would use job costing? Provide examples of two Saudi Companies. Explain the methods with which the cost per unit will be calculated for each type of company using numerical example. please company must be in Saudi Arabia

1. On a depreciating asset most likely the insurance premium would be higher for A A...

1. On a depreciating asset most likely the insurance premium would be higher for A A replacement cost policy B A value based policy C This make no difference D High deductible policy 2. Named perils in an insurance policy A State the exact things that are covered B State broad situations that are covered but are not specific C Are the same as exclusions D Are not permitted in construction 3. All insurance companies are the same and there...

1. On a depreciating asset most likely the insurance premium would be higher for A A...

1. On a depreciating asset most likely the insurance premium would be higher for A A replacement cost policy B A value based policy C This make no difference D High deductible policy 2. High insurance deductible usually means: A lower premiums B Higher premiums C No difference in premium D you are willing to take on more risk 3. Evaluating insurance coverage needs involves A Looking at the costs verses the potential for exposure B Only getting coverage that...

Which of the following statements about bonds is most likely to be true? a)The higher the...

Which of the following statements about bonds is most likely to be true? a)The higher the coupon rate, the lower the price of the bond, holding all else constant. b)The higher the coupon frequency, the higher the price of the bond, holding all else constant. c)The higher the yield to maturity, the higher the price of the bond, holding all else constant.

Which ratios or computations would be most important to: (and explain why) -Creditors and prospective creditors:...

Which ratios or computations would be most important to: (and explain why) -Creditors and prospective creditors: -Stockholders and prospective investors: -Management and the Board of Directors:

Which types of companies would most likely use a process costing system? Provide examples of two...

Which types of companies would most likely use a process costing system? Provide examples of two Compagnies. Explain the methods with which the cost per unit will be calculated for this type of companies. Explain how the different items of inventory will be evaluated?

Subjects