Net Income Is a Key Number for Shareholders,creditors,and Analysts Alike

question 47

Essay

Net income is a key number for shareholders,creditors,and analysts alike.Indeed,analysts' projections of net income for a company are viewed as a standard a company must achieve for a period of time.Failure to achieve this standard can have devastating effects on a company's stock price and its management.
The importance of net income in the eyes of analysts and others can tempt managers to take steps to ensure that the appropriate level of net income is achieved.The process of manipulated net income to achieve a desired level of earnings is referred to as earnings management.
Required:
List and explain the economic motivations for earnings management.

---

Definitions:

War Profiteering

The act of making undue profits from the sale of goods, services, or resources during times of war, often exploiting the circumstances for financial gain.

Top Secret Information

Information that is highly confidential and whose unauthorized disclosure could cause exceptionally grave damage to national security.

Agricultural Production

The process and output related to the cultivation of crops and livestock for food, fiber, and other products.

Economic Respects

Refers to considerations or aspects related to the economy, including factors like growth, stability, and policies.