Many observers believe that firms "manage" their income statements to ________.

Question

Quizplus · Accepted Answer

Firms often manage their income statements to smooth their earnings over time, which helps to avoid big swings in profitability and maintain a stable appearance to investors. This can involve timing the recognition of revenue and expenses or using accounting methods that defer or accelerate earnings as needed. Minimizing taxes over time and generating level sales may be secondary objectives, but the primary goal is typically to avoid large fluctuations in earnings. Maximizing expenditures is not a common goal for firms when managing their income statements.

Many Observers Believe That Firms "Manage" Their Income Statements to ________