The Five Generalizations Essay

696 Words3 Pages
Adrian Medina
Module 2
FIN400 – Analyzing Financial Statements
CSU – Global
Dr. Osman Masahudu

The five generalizations that I believe are from the findings in the case study “The Dangerous Morality of Managing Earnings” go back to the code of ethics that the SEC has set in place. The first is “Honest and ethical conduct,” (Gibson, C.H. 2011) which a lot of the managers showed that they were not honest by doing what they felt necessary to show a positive bottom line. The second generalization is the “full, fair, accurate, timely, and understandable disclosure in reports and documents that a company files,” (Gibson, C.H. 2011). By doing whatever it takes to try and improve the short term the managers are not truly being truthful
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“Ethical decision-making is deeply rooted in cultural values. Cultural norms concerning what is “right” and “wrong,” “acceptable” and “unacceptable,” “good” and “bad”, and “important” and “unimportant” shape one’s beliefs regarding the world around us, including the business environment,” (Geiger, M.A., Quirvan, C. & Hazera, A. 2007). Management’s ability to manage the earnings in the long run is that they will not have any earnings in the long run if the type of manipulation that is going keeps occurring. The quote from one of the examples, “On accounting manipulations, a profit center controller reported: Accounting is grey. Very little is absolute…You can save your company by doing things with sales and expenses, and, if it’s legal, then you are justified in doing it,” (Gibson, C.H. 2011). This speaks volumes that these type of people don’t care about the true bottom line all they care about is finding a way to manipulate it. In the long term you will effect everything what you do in the short term. The other example would be the following: “Last year we called our customers and asked if they could take early delivery. We generated an extra $300,000 in sales at the last minute. We were scratching for everything. We made our plans, but we cleaned out our backlog and started in the hole this year. We missed our first quarter sales plan. Will catch up by the end of the second quarter,” (Gibson, C.H. 2011). This shows that if you change that
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