How Cooking the Books Works

How Cooking the Books Works
by Lee Ann Obringer

The year 2002 saw the fire of an era of skyrocketing stock prices and booming transactiones. Things that had go all overmed to be too not bad(predicate) to be true were just that. Companies that we previously thought of as unstoppable didnt have the earnings they told us they did.
Instead, they had been cooking the books to constrain the appearance of earnings that really didnt exist. A company is inculpatory of cooking the books when it knowingly includes incorrect information on its monetary statements -- manipulating expenses and earnings to improve their earnings per share of stock (EPS).
In this article, well look at the tricks that some companies used to beef up their financial documents as well as why they do it. Well also examine some of the fallen giants like Enron and WorldCom to see what happened and where they are now.
 
Why Cook the Books?
Managing earnings (or cooking the books), is hardly a way of making things look better than they very are to keep stockholders happy, entice new investors, meet bud trip ups, and well-nigh importantly, earn executive bonuses. Executive bonuses are tied to specialized levels of earnings, making it extremely tempting to do just close to anything to meet -- or appear to meet -- the goal.



But not all book cooking is motivated by greed. By making revenues appear larger than they actually are, a try company could stay afloat with investors money until it can circle a true profit. Heres an example. Imagine youre a kid with a lemonade stand and you want to build a roof over it so that you and your customers arent in the hot sun. You dont have the money because business hasnt been that good. Your brother has the money, but he wont lend it to you unless he knows that hell do work something in the deal. Youre sure that having a covered lemonade stand leave alone make all the difference for your business because your customers will bang sipping their drinks in the cool shade. So you decide to...If you want to get a full essay, order it on our website: Orderessay



If you want to get a full essay, wisit our page: write my essay .