At times, the data presented in firms’ audited financial statements can seem puzzling. This article describes instances in which the reported figures could leave the firm’s stakeholders with a first impression that the data must be in error, as they are difficult to believe or even counterintuitive. As student detectives address the discussion questions provided, they encounter the discretion provided to firms in designating quarterly-reporting periods, computing gross-profit percentages, and influencing the gains and losses reported on disposal of depreciable assets. In addition, their learn that sizable differences between a firm’s current and quick ratios and spectacular returns on stockholders’ equity might not signify what usually is implied when they are encountered by stakeholders. Other situations addressed include a firm with huge gross profits that nevertheless felt it necessary to liquidate, a retailer of discretionary goods that somehow fared much better than a service firm during an economic meltdown, and a firm reporting different amounts for its account changes depending on which financial statement one looks at. A teaching note provides suggested answers to the discussion questions, learning takeaways, and follow-up discussion points for instructors

Gosman, Martin; Idinopulos, Zach; Lindus, Sophia; Manieri, Michael

At times, the data presented in firms’ audited financial statements can seem puzzling. This article describes instances in which the reported figures could leave the firm’s stakeholders with a first impression that the data must be in error, as they are difficult to believe or even counterintuitive. As student detectives address the discussion questions provided, they encounter the discretion provided to firms in designating quarterly-reporting periods, computing gross-profit percentages, and influencing the gains and losses reported on disposal of depreciable assets. In addition, their learn that sizable differences between a firm’s current and quick ratios and spectacular returns on stockholders’ equity might not signify what usually is implied when they are encountered by stakeholders. Other situations addressed include a firm with huge gross profits that nevertheless felt it necessary to liquidate, a retailer of discretionary goods that somehow fared much better than a service firm during an economic meltdown, and a firm reporting different amounts for its account changes depending on which financial statement one looks at. A teaching note provides suggested answers to the discussion questions, learning takeaways, and follow-up discussion points for instructors

Martin Gosman (), Zach Idinopulos (), Sophia Lindus () and Michael Manieri ()
Additional contact information
Martin Gosman: Department of Economics, Wesleyan University
Zach Idinopulos: Department of Economics, Wesleyan University
Sophia Lindus: Department of Economics, Wesleyan University
Michael Manieri: Department of Economics, Wesleyan University

No 2026-007, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Pages: 12 pages
Date: 2026-03
New Economics Papers: this item is included in nep-acc
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.wesleyan.edu/pdf/mgosman/2026007_gosman.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2026-007

Access Statistics for this paper

More papers in Wesleyan Economics Working Papers from Wesleyan University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Manolis Kaparakis ().