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The purpose of this paper is to compare companies in a developing country with those of a first‐world country. For this purpose South African (SA) companies in the…
The purpose of this paper is to compare companies in a developing country with those of a first‐world country. For this purpose South African (SA) companies in the chemical, food and electronic industries are to be evaluated on the hand of cash flow ratios and compared with companies in the USA in similar industries.
Giacomino and Mielke proposed nine cash flow ratios for performance evaluation. Ratios were calculated for companies in the USA in the chemical, food and electronic industries for 1986‐1988. Industry norms were calculated for the period, indicating that the potential existed to develop benchmarks for the ratios by industry. Jooste calculated cash flow ratios for listed companies in SA, similar to those calculated by Giacomino and Mielke. The results of the SA companies were then compared with the US companies.
The comparison revealed some similarities and differences. The cash flow sufficiency ratio showed that the SA industries had enough cash to pay primary obligations, whereas the US industries did not. At the levels of cash generated by SA industries the investments in assets and dividend payouts were more than for US industries. The cash flow generated by assets used in SA is also more than that of the USA but US industries retire long‐term debt in a shorter period than SA industries.
The periods used in the comparison differ. Research using the same periods was not available. No information was available on the state of the economies in each country for those periods.
The work done by Giacomino and Mielke is to be recommended. Further studies on the utility of cash flow data would be necessary to develop a set of cash flow‐based ratios. Such ratios used in conjunction with traditional balance‐sheet and income statement ratios should lead to a better understanding of the financial strengths and weaknesses of a company.
By comparing industries of a developing country with those of a first‐world country one may have an indication of the performance of SA companies in a global market.
The failure of an entity is not necessarily an accounting and financial problem. It may include factors such as earnings management and personal values. The problem with…
The failure of an entity is not necessarily an accounting and financial problem. It may include factors such as earnings management and personal values. The problem with managing earnings is it becomes an ethical practice, regardless of who is or may be affected by the practice or the information that flows from it. Therefore, the purpose of this paper is to survey students and business managers to measure their perceptions about the morality of earnings management actions. Accounting educators should aim to assist students to understand how they may react once confronted with an ethical conflict when in practice.
This paper conducts a survey of undergraduate accounting students and business managers (MBA students) at a reputed international university. Undergraduate students, majoring in accounting and business managers were surveyed to measure their perception of specific earnings‐management actions. The questionnaire includes 20 items relating to ten earnings‐management practices. The respondents were required to rate each question on a five‐point scale ranging from 1, an ethical practice, to 5, totally unethical. The frequency distributions and the mean values were calculated, using a 0.05 difference in the mean values as significant. This paper uses a similar questionnaire as Giacomino and Akers. This questionnaire was originally used by Bruns and Merchant.
The evidence in this paper shows that there is no significant difference between the perceptions of business managers and students regarding the morality of earnings management. Furthermore, the survey indicated that more courses must be offered at universities to address such aspects of ethics and earnings management.
This paper indicates that business students need more exposure to and understanding of earnings management. There should be regular reports of fraudulent practices as a result of earnings management by the media and academic journals and greater emphasis should be placed in the accounting curricula on earnings management practices. However, difficult, it should be integrated into business courses or a separate business ethics course or an accounting course taught by accounting and ethics academia. Furthermore, Giacomino and Akers suggest that the “real‐world” aspects of earnings management practices be enhanced and that experienced business professionals become an integral part of accounting courses. By using experienced professionals during lectures and making discussions of earning more realistic, there is an expectation that the differences between students and business managers may be reduced.