Question

1. In looking at AFN, how can profit margins be manipulated by management through certain actions?

Answer 1

Here is the answer for your good question :-

The profit margins can be manipulated by the management through the following certain actions.:-

There are several ways through which the profit margins can be manipulated . some of them are discussed below.

- Changing accounting standards especially for

• - Depreciation.
• - Depletion.
• - Amortization

- Shifting the expences into the current period.

- Manipulating income statement .

- Manipulating balanced sheet.

- Manipulating of Cashflow statement.

- Manipulation through acquisitions of other companies.

- Manipulations through corporate merger.

- Manipulation in shares and earnings per share.

- Holding the revenue back.

- Shifting the revenue of current ear to the next year.

- Not recordin gthe expenses in to the current period.

- Improper accounting assumptions.

- Amortizing of cost

- Making changes in accounted standards.

- Manipulating the operation cost.

- Increasing the profits by improper ways..

- Recording the revenue for the unsold products and services.

- Showing investment income as revenue.

- Inflating the incomes.

- Deflating the expenses and lossess.

- Showing more profits than the gained

All these actions are performed by the management inorder to manipulate the profit margins.

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