ACC 230 WEEK 3 DQ 2 - Week 3 Discussion Question 2 Due...

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Week 3 Discussion Question 2 · Due Date: Day 4 [Main forum] · Provide an example from the text or the Internet that demonstrates a situation in which a company’s net profits looked good in the statements, but the gross or operating profits presented a different picture. Discuss how this might have occurred. · Respond to the question addressed in Problem 3.6 on p. 109 (Ch. 3): “Why is the bottom-line figure, net income, not necessarily a good indicator of a firm’s financial success?” (Hint: Look for indicators like liquidity or solvency to answer this discussion question.)
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Enron is a classic example of this. Enron's net profits looked good in the statements to investors and wall street who in turn endorsed the company and drove up it's value. Now, that being said the operating profits presented a different picture and it turned out the company was inflating the profit which was not indicative of the operating profits. Enron used a Big Six accounting firm in order to accomplish this and it was dscovered that accounting firm was in collusion with Enron
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This note was uploaded on 11/21/2011 for the course ACC 230 acc 230 taught by Professor Connie during the Spring '11 term at University of Phoenix.

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ACC 230 WEEK 3 DQ 2 - Week 3 Discussion Question 2 Due...

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