|Operational Earnings Management|
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Definition of Operational Earnings Management
Operational Earnings Management
management actions taken in the effort to create stable
The use of various forms of gimmickry to distort a company's true financial performance in order to achieve a desired result.
A characterization used by the Securities and Exchange
earnings of a firm as reported on its income statement.
a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received
Net income adjusted to exclude selected nonrecurring and noncash items of reserve, gain, expense, and loss.
Also called surplus management, the task of managing funds of a financial
This important ratio equals the net
Percentage of earnings relative to total assets; indication of how
A management style that de-emphasizes the significance of economic
Very short maturity bills that the Treasury occasionally sells because its cash
a professional designation in the area of management accounting that
A measure of earnings that includes only the results of the primary operating
The application of financial principals within a corporation to create and
a set of formal methods
Revenue recognized to date under the percentage-of-completion method in excess of amounts billed. Also known as unbilled accounts
Demand Management Policy
Fiscal or monetary policy designed to influence aggregate demand for goods and services.
diluted earnings per share (EPS)
This measure of earnings per share
Net income for the company during the period.
In general, refers to a company's total sales less cost of sales and operating expenses, including interest and income tax.
earnings before interest and income tax (EBIT)
A measure of profit that
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Earnings before interest and taxes (EBIT)
The operating profit before deducting interest and tax.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
The operating profit before deducting interest, tax, depreciation and amortization.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
The active manipulation of earnings toward a predetermined target.
Earnings per Share
A measure of the earnings generated by a company on a per
Earnings per share (EPS)
EPS, as it is called, is a company's profit divided by its number of outstanding
earnings per share (EPS)
See basic earnings per share and diluted earnings per share.
Earnings per share of common stock
How much profit a company made on each share of common stock this year.
Earnings retention ratio
Positive or negative differences from the consensus forecast of earnings by institutions
The ratio of earnings per share after allowing for tax and interest payments on fixed interest
EBBS - Earnings before the bad stuff
An acronym attributed to a member of the Securities and
EBDDT - Earnings before depreciation and deferred taxes
This measure is used principally by
The real flow of cash that a firm could pay out forever in the absence of any change in
Fully diluted earnings per shares
earnings per share expressed as if all outstanding convertible securities
Institute of Management Accountants (IMA)
an organization composed of individuals interested in the field of management accounting; it coordinates the Certified management
Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to
management refers to the individuals in an entity that have the authority and the responsibility to manage the entity. The positions of these individuals, and their titles, vary from one entity to another and, to some extent, from one country to another depending on the local laws and customs. Thus, when the context requires it, the term includes the board of directors or committees of the board which are designated to oversee certain matters (e.g., audit committee).
The production of financial and non-financial information used in planning for the future; making decisions about products, services, prices and what costs to incur; and ensuring that plans are implemented and achieved.
a discipline that includes almost
Management Accounting Guidelines (MAGs)
pronouncements of the Society of management Accountants of
Management buyout (MBO)
Leveraged buyout whereby the acquiring group is led by the firm's management.
management buyout (MBO)
Acquisition of the firm by its own management in a leveraged buyout.
Management/closely held shares
Percentage of shares held by persons closely related to a company, as
This is difficult to define in a few words—indeed, an
management control system (MCS)
an information system that helps managers gather information about actual organizational occurrences, make comparisons against plans,
management expense ratio (MER)
The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund.
An investment advisory fee charged by the financial advisor to a fund based on the fund's
The fee paid to the fund’s manager for supervising the administration of the fund.
management information system (MIS)
a structure of interrelated elements that collects, organizes, and communicates
the preference of a manager in how he/she interacts with other stakeholders in the organization;
Related: Investment management.
net income (also called the bottom line, earnings, net earnings, and net
a philosophy about increasing a firm’s performance by involving all workers and by ensuring
A term frequently used to describe earnings after the removal of the
a formulation of the details of implementing
Operationally efficient market
Also called an internally efficient market, one in which investors can obtain
Passive investment management
Buying a well-diversified portfolio to represent a broad-based market
performance management system
a system reflecting the entire package of decisions regarding performance measurement and evaluation
Related: Investment management
earnings before the effects of any earnings-management activities.
price-earnings (P/E) multiple (ratio)
Ratio of stock price to earnings per share.
Price / Earnings (P/E) Ratio
The ratio of price to earnings. Faster growing or less-risky firms typically have higher P/E ratios than either slower-growing or more risky firms.
Price/earnings ratio (PE ratio)
Shows the "multiple" of earnings at which a stock sells. Determined by dividing current
price/earnings ratio (price to earnings ratio, P/E ratio, PE ratio)
This key ratio equals the current market price
Price to Earnings Ratio (P/E, PE Ratio)
A measure of how much investors are willing to pay for each dollar
Reported net income with selected nonrecurring items of revenue or gain
Real Actions (Earnings) Management
Involves operational steps and not simply acceleration
Accounting earnings that are retained by the firm for reinvestment in its operations;
Profits a company plowed back into the business over the years. Last January’s retained earnings, plus the net income or profit that a company made this year (which is calculated on the income statement), minus dividends paid out, equals the retained earnings balance on the balance sheet date.
The residual earnings of the company.
A company’s accumulated earnings since its inception, less any distributions to shareholders.
earnings not paid out as dividends.
Net profits kept to accumulate in a business after dividends are paid.
The process of identifying and evaluating risks and selecting and managing techniques to
Roth IRA. An IRA account whose earnings are not taxable at all under certain
Society of Management Accountants of Canada
the professional body representing an influential and diverse
Statement of retained earnings
An adjunct to the balance sheet, providing more detailed information about the beginning balance, changes, and ending balance in
Statement on Management Accounting (SMA)
a pronouncement developed and issued by the management
Statement Retained Earnings
One of the basic financial statements; it takes the beginning balance of retained earnings and adds net income, then subtracts dividends. The Statement of Retained earnings is prepared for a specified period of time.
Strategic management accounting
The provision and analysis of management accounting data about a business and its competitors, which is of use in the development and monitoring of strategy (Simmonds).
strategic resource management
organizational planning for the deployment of resources to create value for customers and shareholders; key varibles in the process include the management of information and the management of change in response to threats and opportunities
the cooperative strategic planning,
Related: asset management
Reported earnings that have had the after-tax effects of all material
the use of all techniques that help an organization achieve its goals
Top-down equity management style
A management style that begins with an assessment of the overall
total quality management (TQM)
a structural system for creating organization-wide participation in planning and implementing a continuous improvement process that exceeds
A variety of approaches that emphasize increasing shareholder value as the primary goal of every business.
Working capital management
The management of current assets and current liabilities to maximize shortterm liquidity.
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