Financial Shenanigans, Fourth Edition: How to Detect Accounting Gimmicks & Fraud in Financial Reports, 4th Edition

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Key Metric Shenanigan No. 1: Showcasing Misleading Metrics That Overstate Performance

Above all, do no harm.

—HIPPOCRATES, THE FATHER OF WESTERN MEDICINE

Newly minted doctors are required to take the Hippocratic oath and pledge their commitment to practice medicine ethically. This oath is widely attributed to Hippocrates, the father of Western medicine, in the fourth century BC, and the gist of it can be boiled down to “Above all, do no harm.”

Perhaps corporate managers should be made to study this solemn oath taken by physicians and apply it in earnest when they communicate with investors. In so doing, they would pledge to never knowingly harm investors and always refrain from showcasing metrics that misrepresent performance. Based on what ...