Financial Statement Analysis

Running head: ACCOUNTING STATEMENT ANALYSIS
Accounting statement analysis
Name of the student
Name of the university
Student ID
Author note

ACCOUNTING STATEMENT ANALYSIS1
Answer (a)
Top 3 reasons behind beating the targets are –
 Stock price – meeting benchmark for earning or beating the target establish the credibility
with capital market. It helps in maintaining or enhancing the stock price of the entity.
Further, the managers believe that beating targets or meeting benchmark conveys the
prospects for future growth to the investors1.
 Career concern – Concern of a manager regarding his or her external reputation assists in
explaining desire to hit the target and it is less driven by the short term motivations for
compensations as compared to career concerns. Repetitive failure in meeting the earning
benchmark may inhibit intra-industry mobility or upward as the same mark the managers
as not able to deliver the promises.
 Enhance reputation – apart from career concern and stock price another reason behind
beating the target is enhancing the reputation with the stakeholders like suppliers,
creditors and customers and therefore to get better trade terms. However, employee
bonuses and lessening the forecasted debt cost and maintaining the bonuses of the
employees are comparatively less significant motivations to meet the benchmark or beat
the targets2.
Major reason behind the difference in financial reporting incentives and received by
average CEOs is compensation policy. It is shaped in such manner that will provide the top
executives with higher amount of incentives. Further, owing to public pressure directors are
reluctant regarding rewarding CEOs with notable financial gains. Hence, they are also reluctant
1 Pdfs.semanticscholar.org. N. p., 2020. Web. 24 Jan. 2020.
2 Pdfs.semanticscholar.org. N. p., 2020. Web. 24 Jan. 2020.