For the Situations Described Below, Explain Whether Managers Would Be

question 2

Essay

For the situations described below, explain whether managers would be motivated to manage earnings, assets, and equity upward and liabilities downward, or alternatively, managers may be motivated to manage earnings, assets, and equity downward and liabilities upward.
$$\begin{array} { l | l | } \hline \text { Situation } & \begin{array} { l } \text { Management motivation } \\\text { (Upward / Downward) }\end{array} \\\hline \text { To influence investors to pay more for the firm's } \\\text { shares. } & \\\hline \text { To reduce the likelihood of additional taxes or } & \\\text { regulations. } & \\\hline \begin{array} { l } \text { To take a "big bath" in a bad year by recording } \\\text { more expenses than usual so that future years } \\\text { are more likely to show higher and rising } \\\text { profitability, resulting in higher future } \\\text { compensation or stock price. }\end{array} & \\\hline \text { To reduce riskiness of its cash flows and obtain } & \\\text { funds from the bank at a lower interest rate. } & \\\hline \begin{array} { l } \text { To obtain a stronger bargaining position in } \\\text { merger negotiations. }\end{array} & \\\hline\end{array}$$

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Definitions:

C-N Bond

A covalent bond between a carbon atom and a nitrogen atom, fundamental in organic chemistry and biology due to its presence in amino acids, proteins, and many organic compounds.

Charge

An inherent property of particles that causes them to experience a force in the presence of an electromagnetic field.

Lewis Structure

A graphical representation illustrating the connections between atoms within a molecule, including any existing unpaired electrons.

Molecular Formula

A representation of the number and type of atoms in a molecule, but not the arrangement or bonds between them.