Earnings Management
Earnings Management can be for positive or for fraudulent purposes. This project explores the various methods in which firms engage in Earnings Management and different models which may explain the various factors effecting Earnings Management. |
TABLE OF CONTENTS Introduction 3 Revenue Management 3 Earnings Management 3 Motives 5 Instruments 5 Project Methodology 8 Objective 8 Scope 8 Methodology 8 Analysis 9 Model 1 9 Model 2 14 Model 3 21 Satyam Case Analysis: 28 Conclusion 29 REFERENCES 32
Introduction
Revenue Management
It is a scientific way of maximizing profitability in capacity constrained industries by dynamically managing prices, inventories and capacity. The application of revenue management is based on the fundamental principles of market segmentation and price discrimination. Techniques of revenue management are widely used in the services industry. At a basic level, it involves allocating the right inventory to the right customer at the right price. This is also known as yield management.
In the Indian context application of revenue management can be seen in many fields: * Travel and Tourism: * Advance purchase of tickets offered by airlines * Weekend discount by hotels * Tatkal service by Indian Railways * Different tariffs charged by power generation and distribution companies * Software companies
Revenue management has been named as the “number one emerging business strategy” by the Wall Street Journal. Application of management science models based on linear programming has improved the contribution to profit for a major steel company (Tata Steel) in India by $73 million in 1986-87 and given a cumulative impact of hundreds of millions of dollars in later years.
Earnings Management
It covers a wide variety of legitimate and illegitimate actions by management that affects the earnings of a company. It is strategy used by the management to deliberately manipulate the company’s
TABLE OF CONTENTS Introduction 3 Revenue Management 3 Earnings Management 3 Motives 5 Instruments 5 Project Methodology 8 Objective 8 Scope 8 Methodology 8 Analysis 9 Model 1 9 Model 2 14 Model 3 21 Satyam Case Analysis: 28 Conclusion 29 REFERENCES 32
Introduction
Revenue Management
It is a scientific way of maximizing profitability in capacity constrained industries by dynamically managing prices, inventories and capacity. The application of revenue management is based on the fundamental principles of market segmentation and price discrimination. Techniques of revenue management are widely used in the services industry. At a basic level, it involves allocating the right inventory to the right customer at the right price. This is also known as yield management.
In the Indian context application of revenue management can be seen in many fields: * Travel and Tourism: * Advance purchase of tickets offered by airlines * Weekend discount by hotels * Tatkal service by Indian Railways * Different tariffs charged by power generation and distribution companies * Software companies
Revenue management has been named as the “number one emerging business strategy” by the Wall Street Journal. Application of management science models based on linear programming has improved the contribution to profit for a major steel company (Tata Steel) in India by $73 million in 1986-87 and given a cumulative impact of hundreds of millions of dollars in later years.
Earnings Management
It covers a wide variety of legitimate and illegitimate actions by management that affects the earnings of a company. It is strategy used by the management to deliberately manipulate the company’s
References: * between Pakistani Listed Companies and Chinese Listed Companies by Syed Zulfiqar Ali Shah, Hui Yaan and Nousheen Zafar (2010) * Ownership Structure and Earnings Management in Emerging Markets: The Case of Jordan by Nedal Al-Fayoumi, Bana Abuzayed and David Alexander (2010) * Board of Directors and Opportunistic Earnings Management: Evidence from India by Jayati Sarkar, Subrata Sarkar and Kaustav Sen(2006) * Case Study of Satyam Scam by Subhendra Kataria and Siddharth Kamdar: http://www.scribd.com/doc/16782318/Case-Study-of-Satyam-Scam * Understanding Corporate Annual Reports by Brian Stanko and Thomas Zeller * Report by Panel on Audit Effectiveness, Chapter 3: http://www.pobauditpanel.org/downloads/chapter3.pdf * Prowess Database * EMIS Database * http://www.investopedia.com/university/accounting-earnings-quality/earnings9.asp * http://www.decisioncraft.com/dmdirect/revenue_management.htm