Question 1 Positive Accounting Theory 20 marks Spend about 35 minutes on this short answer question. Write about 1 sentence per mark. Laisani is studying earnings management among 100 large companies in Fiji. She developed the following regression model for the study: Y = ax1 + bx2 + CX3 + dx4 + ex5 where X1 = Credit Sales, X2 = PP&E, X3 = Inventory, X4 = Staffing Costs, X5 = Industry and a, b, c, d and e represent the coefficients Required a) Briefly outline why Laisani may have included credit sales, PP&E and inventory in the model (3 marks). b) Briefly outline whether Laisani's study adopts a scientific or naturalistic approach (2 marks) c) Explain how Laisani could use the model to identify whether a particular firm is practicing earnings management (4 marks). d) Briefly outline another type of earnings management apart from the one being studied in this model (3 marks). e) Laisani found that one company took a bath" in the last financial period. Use relevant examples to explain how and why the firm may have done so (4 marks). f) Use agency theory to distinguish between the dividend retention problem and the excessive dividend problem (4 marks). Question 1 Positive Accounting Theory 20 marks Spend about 35 minutes on this short answer question. Write about 1 sentence per mark. Laisani is studying earnings management among 100 large companies in Fiji. She developed the following regression model for the study: Y = ax1 + bx2 + CX3 + dx4 + ex5 where X1 = Credit Sales, X2 = PP&E, X3 = Inventory, X4 = Staffing Costs, X5 = Industry and a, b, c, d and e represent the coefficients Required a) Briefly outline why Laisani may have included credit sales, PP&E and inventory in the model (3 marks). b) Briefly outline whether Laisani's study adopts a scientific or naturalistic approach (2 marks) c) Explain how Laisani could use the model to identify whether a particular firm is practicing earnings management (4 marks). d) Briefly outline another type of earnings management apart from the one being studied in this model (3 marks). e) Laisani found that one company took a bath" in the last financial period. Use relevant examples to explain how and why the firm may have done so (4 marks). f) Use agency theory to distinguish between the dividend retention problem and the excessive dividend problem (4 marks)