What is financial makeup?

What is financial makeup?

Financial managers can do certain things to increase or decrease of net income that is saved in the year. This is called profit smoothing, smoothing of income or just plain old makeup. This is not the same as fraud or cookbooks.

The more profit smoothing includes push some amount of income and at the expense of other years they would have normally captured. A technique for smoothing of the gain is to process repairs and routine maintenance. This is called deferred maintenance. Many routine and recurring costs for maintenance required for automobiles, trucks, machines, equipment and buildings can be delayed or deferred to later.

A company that has a considerable amount of money for the training of employees and development going on these programs could be delayed until the next year, so the cost of the current year is lower.

A company can cut on the expenditure of the current year on market research and product development.

A company can alleviate the rules concerning when slow paying customers have been written offshore and charges of bad debt or bad debts. The company can pick up some of its costs of bad debts next year deferred reporting.

An asset that is not actively used may be very little current or future business value. Instead of writing costs a depreciated of active reduction as a loss in the current year, the company could slow the depreciation until the next year.

You can see how to manipulate the timing of certain expenses of an effect on net income. This is not illegal, although companies can go too far in massage numbers so that its misleading financial statements. For most but profit smoothing is not much more that robbing Peter to pay Paul. Accountants to designate these compensatory effects. The titles of the next year offset and reverse the effects of the current year. Less expensive, this year is compensated by costs more the following year.

What is financial makeup? - Internet Business Online News