What are the implications for cash flow

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Reference no: EM13271507

Companies often try to keep accounting earnings growing at a relatively steady pace, thereby avoiding large savings in earnings from period to period. They also try to meet earnings targets. To do so, they use a variety of tactics. The simplest way is to control the timing of accounting revenues and costs, which all firms can do in at least some extent For example, if earnings are looking too low this quarter, then some accounting costs can be deferred until next quarter. This practice is called earnings management. It is common and it raises a lot of questions. Why do firms do it? Why are firms even allowed to do it under GAAP? Is it ethical? What are the implications for cash flow an shareholder wealth?

Reference no: EM13271507

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