big bath

Definition

The process of manipulating a company's earnings to make them appear worse than they truly are. Losses are expanded so that the company can mislead investors and shareholders. Big bath accounting reduces the amount of assets held by the company so that future quarterly performance will appear better than it truly is. This type of procedure is typically used during a bad year. For example, a company may elevate sales declines to a level that will help future losses appear minimal.
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