Solution-Identify the affected parties in any scheme to

Identify the affected parties in any scheme to manage profit

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Reference no: EM133008503

Companies are aware that analysts focus on profitability in evaluating financial performance. Managers have historically utilized a number of methods to improve reported profitability that are cosmetic in nature and do not affect "real" operating performance. These methods are subsumed under the general heading of "earnings management."

Justification for such action typically includes the following arguments:

Increasing stock price by managing earnings benefits stockholders, thus, no one is hurt by these actions.
Earnings management is a temporary fix, such actions will be curtailed once "real profitability" improves, as managers expect.

Required:

Problem a. Identify the affected parties in any scheme to manage profits to prop up stock price.

Problem b. Do the ends of earnings management justify the means? Explain.

Problem c. To what extent are the objectives of managers different from those of stockholders?

Problem d. What governance structure can you envision that might inhibit earnings management?

Reference no: EM133008503

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Identify the affected parties in any scheme to manage profit

Reference no: EM133008503

Reference no: EM133008503

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