When the economy is poor, a fall in profits can easily be explained to shareholders when most companies in the industry are also experiencing a decline in earnings; therefore, therefore when the economy is poor there is a tendency within an entity to _______.
A)maximize write-offs
B)maximize profits
C)minimize revenues
D)minimize profits

Question

Quizplus · Accepted Answer

When the economy is poor and most companies in the industry are experiencing a decline in earnings, there is a tendency within an entity to maximize write-offs. This is because it's easier to justify lower profits or losses during such times, and taking larger write-offs can clean up the balance sheet and reduce tax liabilities, setting the company up for better financial health when the economy improves.

When the Economy Is Poor, a Fall in Profits Can