Reference no: EM13111537 , Length: 1087 words
Answer the following on 8 1/2x 11 paper. Be succinct. Try to give examples. Label each question by number and make sure to put your name on each page.
- Earnings Management
Management of earnings has been a newsworthy subject, above and beyond the business press.
Analysts are forced to devote time and attention to ferreting out the real numbers, when the clues are available. Explain five kinds of earning management, giving examples.
B. Identifying red flags
One step in assessing the quality of earnings is to look for red flags. An example of a red flag is a significant increase in accounts receivable without commensurate growth in sales (that is, accounts receivable turnover decreases). List five other flags the astute analyst might look for, why it is a red flag, and identify where the analyst might find this information.
C. What are 5 intangible factors important in evaluating a company's financial performance, butnot available in the annual report?
D. Since cash generally does not yield a return, why does a company hold cash?
E. What is window dressing? Can you tell if the financial statements are window dressed or not?
F. What are discretionary costs? Why are they significant to an analysis, and especially to the quality of earnings?
G. Why do financial analysts generally attach such great importance to inventories?
What is the purpose in presenting fully diluted EPS?
b. Is it possible to have a positive net income and negative cash flow from operations? Ifyour answer is no, explain fully. If your answer is yes, provide two examples when onemight find this.
It is possible to have a negative net income and positive cash flow from operations? If your answer is no, explain fully. If your answer is yes, provide two examples when one might find this.