00:01
Hello students, here is a question.
00:03
Which of the following choices is not a common method used for the management to manipulate earnings? so, we have four options given in the question.
00:11
So, our right answer is option c, that is, make financing cost appear to operating expenses so that they will not affect net income from counting, sorry, from continuing operations.
00:55
So, this is our right answer.
00:57
So, reason, usually management manipulate earning with an objective of suspensing material things, inflating profit or cancelling or adjustment items so their profit looks attractive by showing the financial cost of an operating cost, the effect of null filed and the net income by continuing operations will be the same because the net income from continuing operations is arriving after an adjustment of all recurring items such as finance, cost, tax and operating expenses like rent depreciation etc.
01:26
So, suppose the company show financial expansion under operating cost, the operating income fall shall fall when operating income, that is, the income generated from the core business activity fall, the share price shall permit in stock market.
01:41
So, the management usually won't restore this method.
01:43
So, the first option is not justifiable.
01:46
So, the most common method is earning smoothing whereby the management adjust the timing of a cost so the profit figure won't look ugly.
01:53
So, this is an incorrect option.
01:55
When it comes to option b, adjusting the timing of a cost that earning a future decrease in bad year is known as big bath...