In 2002 and 2003, the Financial Markets Were Hit by Many

question 108

Essay

In 2002 and 2003, the financial markets were hit by many corporate accounting scandals.Discuss these scandals and the impact they would have not only in terms of a flight to quality, but also in terms of the faith that people place in bond rating agencies.

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Definitions:

Fixed

Costs that do not change with the level of production or sales activity, such as rent, salaries and insurance.

Variable

A quantity that can change or vary, often used in mathematics and statistics to represent an element that can assume different values.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, influenced by the proportion of fixed to variable costs.

Fixed Costs

Fixed Costs are business expenses that remain constant regardless of the level of production or sales activity, such as rent, salaries, and insurance.