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Explain When Earnings Management May Be an Ethical Practice

question 17

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Explain when earnings management may be an ethical practice.


Definitions:

Net Income

A company's total earnings or profit, calculated as revenue minus expenses, taxes, and costs.

FOB Destination

A shipping term indicating that the seller is responsible for the goods until they are delivered to the buyer's specified location, whereupon title and risk of loss pass to the buyer.

Revenue Recognition

The accounting principle dictating the specific conditions under which revenue is recognized or recorded.

Shipment Date

The shipment date is the day on which goods are officially transferred from the seller to the carrier or dispatched for delivery to the buyer.

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