Dragon Soup and Earnings Management (B) Harvard Case Solution & Analysis

Although he will not want to break any legal rules, Jason is interested to see whether accounting and actual actions alternatives can be used to boost the organization's financial position and increase its perceived value to investors. The case permits him to pick from a menu of alternatives, including selections on product pricing, stock levels, accounts receivables, leasing or purchasing valuation or sale of securities and a brand new machine.

These alternatives are fed into an Excel spreadsheet which fixes financial projections and accounting disclosures properly. In the (B) case, Ben Kerr, Chief Investment Officer at one of Dragon's major adversaries, considers the financial statements made by Dragon to unravel any earnings management behaviour and confirm a real value for the business. A richer discussion is obtained when considering the ethical angles of the selection procedure, though the case may be centered on the accounting results of actual choices. In particular, how much 'earnings management' should be pursued and what types of behaviours are simply going to be unraveled by investors?

PUBLICATION DATE: October 31, 2011 PRODUCT #: KEL575-HCB-ENG

This is just an excerpt. This case is about FINANCE & ACCOUNTING

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