Managers Often Are Accused of Making Accounting Changes in Order

question 42

Essay

Managers often are accused of making accounting changes in order to avoid regulation,to achieve compliance with debt covenants,to increase compensation through earnings-based bonus plans,or to smooth earnings.Managers may indeed believe that by increasing earnings,and thus increasing earnings per share,stock prices will increase.
Explain the relationship between attempts by managers to manipulate earnings through accounting changes and the efficient market hypothesis.

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Definitions:

Strabismus

A visual disorder where the eyes do not properly align with each other when looking at an object, causing a discrepancy in gaze direction.

Hypotonic Muscles

Refers to muscles that have lesser than normal tone or tension, often resulting in weakness and a reduced ability to contract.

Range of Motion

The full movement potential of a joint, usually its range of flexion and extension; an indicator of joint health.

Achilles Heel

A metaphor for a person's weak point or vulnerability, originating from the Greek mythology of Achilles.