Why would management manipulate profitability ratios?

Accounting
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Why would management manipulate profitability ratios?

Dec 1st, 2014

Management can manipulate profitability ratios in two ways first they may increase earnings of current financial period this is done by increasing revenues and profits. Furthermore profitability ratios can also be manipulated by reducing expenses. These manipulations are done in order show better financial position of company.  That may help organization in increasing investor’s confidence. Showing increased profits may also help management getting bonuses and monetary rewards. Management may also decrease organization`s profitability ratios by decreasing profitability in order to save them self from taxes.


Dec 1st, 2014

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