1. Explain earnings management using classification shifting and how firms might benefit using this approach? Refer to earnings persistence in your answer.

2. Explain earnings management in detail and provide an example of how a firm might conduct earnings management? Can a firm continually manipulate their earnings opportunistically for their own benefit?

3. There are three types of earnings manipulation (earnings management, real earnings management & classification shifting). Which particular type of earnings manipulation is most likely to reduce firm value in the long-term?

4. Explain how we work backwards to evaluate a positive or negative change in Return on Common Stockholders Equity.