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Finance & Accounting
Pages 7 (1757 words)
Managers of various companies’ products increase the value of their sales by forcing extra products through their supply channel. This can occur as an intentional plan of management in order to increase sales revenue…
This can occur as an intentional plan of management in order to increase sales revenue. The incentives as to why managers would resort to extreme earnings management technique such as Channel stuffing include, First is to increase earnings, in given instances, managers and sales personnel are paid commissions and bonuses based on the overall performance of the company and since extreme earnings management technique such as channel stuffing increases sales volumes thereby having a positive result in relation to sales (LAI, et, al. 2009). This increases their earnings. This technique also creates some sense that the performance of the company is well hence in some ways assist in attracting financial institutions and investors to continue investing in the company with a hope of better proceeds (LAI, et, al. 2009). Secondly, these techniques do help a company to have a competitive advantage over their rivals. This is achieved by making sure that jamming effect is achieved for instance constant premature shipment of products into the market (LAI, et, al. 2009). This will give their competitor hard time to sell their products due to so many goods being offered in the market through this technique. Therefore the second reason gives a clear picture of how an organization can benefit from this technique which shows a well organized team of management (BRIGHAM, et, al 2010). ...
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