Questions and answers Earnings quality

Subject: Retail Marketing

Paper Model: APA

Paper Type: Assignment

Total Words: 2207

Document Outline

Question 1: Why does earning quality matters for marketing participants? Discuss three 
factors, which may encourage managers to engage in earning manipulation. 
Question 2: using both theoretical arguments and empirical evidence, discuss factors, which 
contribute to the observed decline in earning quality.  
References
 


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Question 1: Why does earning quality matters for marketing participants? Discuss three factors, which may encourage managers to engage in earning manipulation.

Higher rate of earning quality provide the more information about the characteristics of financial performance of the firms that have the relations with specific decision made by some of the specific decision makers. The investors prefer to provide the quasi-experimental setting for the local stocks for investigation whether the market rearwards compliances of the firms with the accounting principles. Financial crises of 2007-2008 stress the need for the transparency in the practices of corporate. There are some of the features that define the earning quality; this is the conditional on the relevance of the decision of the information. It is meaningless until it is defined in the context of specific decision model. Second the quality of the earning numbers depend that either it is informative about the financial performance of the firms. It is determined by the relevancy of the financial performance of the firms by the accounting system Abilities for measuring the performance.

Earning manipulation is not the result of frauds and errors. It results due to manipulation made by the culmination of operating activities and accounting rules. It results in the misrepresentation of the accounting and financial results.  Earning manipulation occurs when a company does not maintain it growth of sales and earnings. It becomes difficult for company to maintain its future success. Earning management leads towards pulling profits from following years by providing more pressure on managers in those following years. This earning management increase manipulation and takes management away from its ethical path. There are many factors for increasing manipulation in the financial results.

 

 The quality can be evaluated with the aspect of the decision that depends on the informative representation of financial performance. Organizations organize proxies for the earning qualities into the three broad categories that are investors’ responsiveness to earning, properties of earning, and external indicators of earning misstatements. In the properties of earning it include accruals and earning persistence;   asymmetric timelines; earning smoothness and timely loss recognition in which the earning distances from the targets are viewed as the indication of management of earnings and the management of earning is assumed to erode quality of earning. In the investors responsiveness to earning it includes that coefficient responses’ of earning or R2 from the model of earning returns as a proxy as a quality of earning that relate to Another construct that is ERC. In the external indicators of misstatements of earning it also, include the auditing and Accounting enforcement releases, deficiencies of the procedures of the internal control reported under the Sarbanes Oxley Act as the indicators or viewed of the errors of the management of earning. In the first general observation, the quality depends on the financial performances of the firms and on the measuring of the accounting systems. In the second observation, it is observed that there is no superior quality for the models of decision. In the analyzing method the Meehl approach and Cronbach approaches are the bases of the conclusion. If the earning qualities were the proxies and were the single, construct for measuring independent variables in the analysis. In the third observation, it is observed that all the earning qualities are the proxies that describe that how proxy is outline and commonly measured our conclusion of the specific variables.  Concerning with the earning quality investor's find the good long-term investments as  it refers to the ability of the predicted reported earnings in the future of the company. It refers to the ability of predictable earning, core earning, earning corresponding to the cash flows and sustainable earning. Earning with the high quality provide the guidance for

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