Recent research on the manipulation of profit numbers by managers with a view to influencing share price has shown:
A) no evidence of manipulation
B) firms reporting continuous growth are priced at a discount to other firms
C) reporting of small losses is rare and reporting of small profits fairly common
D) none of the above

Question

Quizplus · Accepted Answer

Recent research has shown that reporting of small losses is rare and reporting of small profits is fairly common, indicating that managers may manipulate profit numbers to present a positive picture of the company and influence share prices. Option A is incorrect as there is evidence of manipulation. Option B is also incorrect as firms reporting continuous growth are usually priced at a premium, not a discount.

Recent Research on the Manipulation of Profit Numbers by Managers