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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.


Definitions:

Ribosomes

The cellular structures responsible for protein synthesis, found floating freely within the cytoplasm or attached to the endoplasmic reticulum.

Cellular Respiration

The metabolic process by which cells produce energy in the form of ATP from glucose, involving various biochemical pathways including glycolysis and the Krebs cycle.

Ribosomal RNA

A type of RNA that combines with proteins to form ribosomes, which are the cellular structures that assemble proteins according to genetic instructions.

Nucleolus

The nucleolus is a densely packed region within the nucleus of a cell where ribosomal RNA is synthesized and assembled into ribosomes.

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