a company's financial results are judged against what the shareholders want out of the business
If there is no desire to sell or raise money for investment or raise money on a stock market and cash flow is good, directors are paid well and shareholders are getting a bit of a dividend then why post a large profit - it just gets taxed
Better to show a small profit so shareholders can still get a divi but reduce tax liabilities
Eric
I'm not an accountant but I was of the opinion that the various accounting standards do not allow the directors to only post the profit that suits them rather than the true profit of the company.
Are you saying the amount of profit a company posts is at the discretion of the directors?
Of course
You gear the business costs and wages and dividends based on expected sales and profit and to what you want to do with a business, what the exit strategy is.
For instance if you want to sell a business, you want to get the very most for it so you drive down costs as much as you can, drive profits as high as you can
The first lesson for all directors is - know the figures and keep knowing them so you can gear costs and wages accordingly
I've been a director in various capacities for nearly 20 years and I know close to exactly how much profit the companies I've worked for will make at least 4 months before the end of the financial year and before the audit
Pensions, advertising, charitable donations investing in plant and equipment are all tax deductable
