What is creative accounting, Financial Management

Assignment Help:

What is Creative accounting

Creative accounting (also termed as aggressive accounting or earnings management) distorts financial analysis of company accounts. Creative accounting is done by organisations to perhaps enhance balance  sheet  or  performance  by  either  exploiting  loopholes in  the  accounting  standards or deliberately  not  showing  certain  items.   Listed  companies  specifically have  added  pressures  for  the maintenance  and  increase  of  share prices; this  obviously  has  an  influence  on  the  valuation  of  company.   As  share  prices  are  stipulated  by  the  market,  information  fed  to  market  can  be manipulated to ensure this.

There has been a severe crackdown on misleading accounts specifically with the disasters such as Enron and WorldCom.   In  USA  there  are  now  huge  financial  penalties  and  even  jail  sentences  for directors deliberately misleading users the accounts. In UK directors are legally obliged to produce true and fair accounts.

 


Related Discussions:- What is creative accounting

State the cash flow from investing activities, Cash flow from investing act...

Cash flow from investing activities The items included in this heading are: Cash payments Cash receipts Acquiring proper

Net present value of the Lease, how to calculate the net present value when...

how to calculate the net present value when there is company tax rate and rate of return assume that lease is for 2 years payable at the begining of the yr, at the end of two yrs t

Valuing mortgage-backed and asset-backed securities, A cash-flow yield is t...

A cash-flow yield is the discount rate that makes the price of a mortgage-backed or asset-backed security equal to the present value of its cash flows. It is built

Cost of debt, Cost of Debt (k ) : This describes the rate of interest paya...

Cost of Debt (k ) : This describes the rate of interest payable on debt.  The cost of debt funds may be calculated when the debt is redeemable or irredeemable. therefore, when deb

Compare and contrast a forward contract and an option, QUESTION (a) Bri...

QUESTION (a) Briefly define foreign exchange rate risk and the three different types of exchange rate risks (b) Identify and outline the different methods of internal and ex

Exchange rate changes decrease risk of foreign investment, Would exchange r...

Would exchange rate changes all time increase the risk of foreign investment? Discuss the condition within which exchange rate changes may actually decrease the risk of foreign inv

Evaluate the fair value of the net assets, Treatment of PER IFRS 3 Bu...

Treatment of PER IFRS 3 Business combinations necessitate goodwill on gaining to be calculated at the date control is gained. The second gaining gives ROB a 75% holding and

Interest rates over the business cycle, Interest rates are the key de...

Interest rates are the key determinants of business cycles in emerging market countries. In the past, several economies had experienced frequent and great changes

Case study - volatility trading, Case Study: Volatility Trading (a) The...

Case Study: Volatility Trading (a) The understanding in this case study deal with Convertible as well as Reverse-Convertible bonds. These are interesting instruments by themsel

Define exchange exposure of company affect by exchange rate, Assume that yo...

Assume that your company has an equity position in a French firm. Explain the condition under which the dollar/franc exchange rate uncertainty does not comprise exchange exposure f

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd