Higher than usual expenses may indicate a company is manipulating earnings using big bath charges.

Question

Quizplus · Accepted Answer

Big bath charges are a common tactic used by companies to reduce future earnings expectations by charging large one-time expenses in the current period. This allows them to manipulate their earnings and make them look better in future quarters. Therefore, higher than usual expenses can indicate the use of big bath charges to manipulate earnings.

Higher Than Usual Expenses May Indicate a Company Is Manipulating