QUIZ TIME

What other names are given to earning management? What other names are given to earning management?

• Borrowing from the future

• Aggressive accounting

• Income Smoothing

• All of the above

Managers are motivated to manipulate income with earnings management.  Which of the following is a (rare) reason(s) for them engaging in this kind of behavior?

• Reduce the company's visibility

• Raise the price of an initial public offering

• Reduce the probability of covenant violation

• All of the above

What benefits managers when excessive provisions for low-persistence special items are frequently recorded?

• It increases future operating earnings.

• It does not affect the manager's performance compensation.

• It increases the manager's bonus.

• A and B

1. Earnings management can be defined as a company's attempt to:

• a. Maximize profitability statements

• b. Manipulate financial statements

• c. Increase efficiency

• d. Reduce costs

2. Which of the following is a strategy used to manage earnings?

• a. Hiding expenses

• b. Focusing on sales

• c. Understating liabilities

• d. All of the above