Question
Ethics Problem: During the 1990s, General Electric put together a long string of consecutive quarters in which the firm managed to meet or beat the
Ethics Problem: During the 1990s, General Electric put together a long string of consecutive quarters in which the firm managed to meet or beat the earnings forecasts of Wall Street stock analysts. Some skeptics wondered if GE managed earnings to meet Wall Streets expectations, meaning that GE used accounting gimmicks to conceal the true volatility in its business. How do you think GEs long run of meeting or beating earnings forecasts affected its Cost of Capital? If investors learn that GEs performance was achieved largely through accounting gimmicks, how do you think they would respond?
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