All Years

$1985-2017$

$1985-2017$

Post$-$SOX Years

$2003-2017$

Required:

The graph displays, for more than $148,000$ company$-$years, each company's net income divided by total stockholders' equity. By what name is this ratio known?

Select the statement that appropriately explains why the graph suggests evidence of earnings management.

a$.$ How many companies reported a ratio near zero $($red bar$)$ in the pre$-$SOX period?

b$.$ How many companies reported a ratio near $-0\mathrm{.}015$ in the pre$-$SOX period?

c$.$ How many companies reported a ratio near $+0\mathrm{.}015$ in the pre$-$SOX period?

d$.$ Divide your answer in $3$a by the total of your answers to $3$a$-3$c$.$ What fraction of the companies in $3$a$-3$c reported a ratio near zero $($red bar$)?$

a$.$ How many companies reported a ratio near zero $($red bar$)$ in the post$-$SOX period?

b$.$ How many companies reported a ratio near $-0\mathrm{.}015$ in the post$-$SOX period?

c$.$ How many companies reported a ratio near $+0\mathrm{.}015$ in the post$-$SOX period?

d$.$ Divide your answer in $4a$ by the total of your answers to $4a-4c.$ What fraction of the companies in $4a-4c$ reported a ratio near zero $($red bar$)?$

e$.$ Do your answers in $3d$ and $4d$ suggest SOX encouraged a greater proportion of companies to honestly report near$-$zero earnings?

Complete this question by entering your answers in the tabs below.

The graph displays, for more than $148,000$ company$-$years, each company's net income divided by total stockholders' equity.

By what name is this ratio known?