Why do the reported earnings of German firms appear to be more ...

[DyllonKazuo]

Why do the reported earnings of German firms appear to be more stable than the reported earnings of U.S. firms?
 
  What will be an ideal response?

Question 2

Which of the following is a difference between export management companies (EMCs) and export trading companies (ETCs)?
 
  A) ETCs deal with both exports and imports, while EMCs deal only with exports.
  B) ETCs are subject to antitrust laws, while EMCs are not.
  C) ETCs typically carry inventory, while EMCs typically do not.
  D) ETCs operate more on the basis of demand, while EMCs operate more on the basis of supply.

[duke02]

Answer to Question 1

Under the German Commercial Code, German firms are permitted to establish accounting reserves for various future expenses including deferred maintenance, future repairs, and exposure to international risks. In contrast, U.S. firms have only limited use of accounting reserves. When preparing financial statements, German firms use these reserves to smooth out fluctuations in their earning flows, giving them the appearance of stability and less risk.

Answer to Question 2

D