Suppose at a management meeting toward the end of 20X2, the CEO and CFO of Illini Company
Question:
Suppose at a management meeting toward the end of 20X2, the CEO and CFO of Illini Company notice that they might not be able to meet the analysts’ expectations of the company’s EPS for 20X2. If this happens, there would be a significant negative impact on the company’s stock price and thus their compensation. As a result, they come to your office and ask what you can do to help Illini meet/beat the analysts’ forecast.
Please identify four ways that can help achieve this goal. You must include at least one way that is allowable under Generally Accepted Accounting Principles (GAAP) and one way that is a clear violation of GAAP.
Please also identify two mechanisms in place or parties (internal or external to the firm) that exist to deter this behavior. For each of the two mechanisms and/or parties listed, explicitly identify one reason why that mechanism and/or party may FAIL as an effective monitor and/or disciplining force.
University Physics With Modern Physics
ISBN: 978-0073513881
2nd edition
Authors: Wolfgang Bauer, Gary Westfall