Why Would Management Manage Earnings to Decrease Income

question 26

Multiple Choice

Why would management manage earnings to decrease income?

• A)The manager's bonus plan is based on reported earnings.
• B)They need to meet the terms of a debt agreement.
• C)To avoid attracting competitors to the industry.
• D)To influence the stock price if the company is planning on going public.

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Definitions:

Regressive Tax

A tax system that takes a smaller percentage of income from individuals as their income increases, often considered less fair to lower-income earners.

Payroll Taxes

Financial obligations required from both employers and employees, pegged to a fraction of the payroll expenses incurred by employers.

Federal Tax Revenues

The income received by the federal government from taxes and other sources used to fund public expenditures.

Excise Tax

An excise tax is a specific tax levied on the sale of certain goods and services, such as alcohol, tobacco, and fuel, usually with the aim of discouraging their use or raising government revenue.