Can someone pls explain why the Answer is not B?
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Option B cannot be the answer because it says that earnings is already in excess of the analyst forecast.. So why to inflate more..?? – If company will report what its has earned i.e actual earnings, then also its will beat analyst forecast and market or street estimates.. So, that’s a good news and management is not required to fake the reports..
Option A says that if actual earnings are reported then, there could be a possible debt covenants violation.. So, to avoid such violation, management has to inflate earnings to be reported..