For each of the following factors, determine if the given change or level of tha
ID: 2402156 • Letter: F
Question
For each of the following factors, determine if the given change or level of that factor would lead an analyst to believe that managers of a firm are more or less likely to engage in earnings manipulation:
?
Earnings Manipulation
?
More likely/less likely
-------------------------------------
1. Days Sales in Receivable Index increases
?
2. Gross Margin Index decreases below 1
?
3. Asset Quality Index increases
?
4. Depreciation Index decreases to below 1
?
5. Leverage Index increases
?
Earnings Manipulation
?
More likely/less likely
-------------------------------------
1. Days Sales in Receivable Index increases
?
2. Gross Margin Index decreases below 1
?
3. Asset Quality Index increases
?
4. Depreciation Index decreases to below 1
?
5. Leverage Index increases
Explanation / Answer
?
1. Days Sales in Receivable Index increases
?More likely
2. Gross Margin Index decreases below 1
?Less likely
3. Asset Quality Index increases
?More likely
4. Depreciation Index decreases to below 1
?Less likely
5. Leverage Index increases -
More likely
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