bonddonraj
Par 100 posts (V.I.P)
Revenue is typically the single largest item reported in a company’s
financial statements. As with the all important bottom line and cash
flows, companies’ reported revenues are not only significant financial
statements in dollar terms, but also in the weight and importance that investors
place on them in making investment decisions.
Trends and growth in the top line of a company’s income statement are
barometers investors use when assessing the company’s past performance
and future prospects, and hence have a direct impact on share prices. There
is therefore greater incentive for the management of the company to
manipulate the revenue figures. Companies may try to boost earnings by
manipulating the recognition of revenue, recognising it either before a sale is
complete or before the product is delivered to the customer1. Following are
some of the examples of companies managing the revenue figures2 in a manner
not permitted by the law:
financial statements. As with the all important bottom line and cash
flows, companies’ reported revenues are not only significant financial
statements in dollar terms, but also in the weight and importance that investors
place on them in making investment decisions.
Trends and growth in the top line of a company’s income statement are
barometers investors use when assessing the company’s past performance
and future prospects, and hence have a direct impact on share prices. There
is therefore greater incentive for the management of the company to
manipulate the revenue figures. Companies may try to boost earnings by
manipulating the recognition of revenue, recognising it either before a sale is
complete or before the product is delivered to the customer1. Following are
some of the examples of companies managing the revenue figures2 in a manner
not permitted by the law: