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

Takeover risk, If the issuer company is taken over, then the bondhold...

If the issuer company is taken over, then the bondholders are likely to suffer. It is due to lowering of the stock prices in the market as a post takeover effect.

How can we calculate the average inventory, Inventory days (Average in...

Inventory days (Average inventory/Cost of sales) x 365days Average inventory can be arrived by taking this year's and last year's inventory values and dividing by 2 - (Ope

Define double-entry bookkeeping, Q. Define Double-Entry Bookkeeping? Do...

Q. Define Double-Entry Bookkeeping? Double-Entry Bookkeeping - Method of recording financial transactions in that every transaction is entered in two or more accounts and inclu

Distributing the dividends and retaining the earnings, The Walter's model, ...

The Walter's model, thus relates the question of distributing the dividends and retaining the earnings to the investment opportunities that are available with the firm. (i) If a

Sensitivity analysis, Sensitivity Analysis A test of an organizations p...

Sensitivity Analysis A test of an organizations performance projections based on varying the key assumptions which is used for forecast performance.

Define primary advantage to a corporation of investing, What is the primary...

What is the primary advantage to a corporation of investing some of its funds in working capital? By investing in working capital a firm acquires the liquidity it requirements he

What are the reasons for mergers and acquisitions, Reasons for mergers an...

Reasons for mergers and acquisitions The key reasons for mergers and acquisitions, is to maximise shareholder wealth otherwise it wouldn’t be worthwhile. R

Estimate most recent year-end financial statements, Select a publicly trade...

Select a publicly traded company (preferably manufacturing oriented; do not use a financial services company such as a bank or a bank holding company) and obtain a copy of their mo

Organization and management pattern of uti, Organization and Management Pat...

Organization and Management Pattern of UTI UTI has a full-time Chairman with an Executive Trustee reporting to him. The Executive Trustee looks after the Corporate Office, Zona

Working capital management, what are the objectives of working capital mana...

what are the objectives of working capital management

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