Answers to Queries

Queries and Answers

Google prioritize short and concise answers to users' queries, no more than 30 words long.

1. Answer questions
2. Be readable
3. Provide for featured snippets
4. Implement local SEO if you are focusing on local business or or local public.
5. Use schema markup
6. Improve page speed and security.
7. Try to build your content in a conversational manner, asking and answering questions.
8. Structurize your copy in short easy-to-read paragraphs with a question form subheading.
9. Create a how-to part on your page.
10. Use different lists with numbers or bullet points, tables, steps, etc.

The most common types of featured snippets are:

• Paragraphs (WHAT questions);
• Lists/ Steps (HOW questions);
• Tables;
• Images;
• Charts.

Start with the most important information to answer the question; transit to more details beyond the direct answer and add visual support; wrap up with examples or case studies.

First of all, to think of the best answer, you have to identify a simple question that users may ask when searching for something related to your area of expertise. 

When you ask a question and understand that the answer is a matter of a simple fact, like somebody's birth date, then it is a so called factoid, and it will be shown as Knowledge Graph. Thus, your question should be more complicated and require a more substantial answer.

Once you have separated more comprehensive questions from the ones that summon factoids, check the techniques that are able to trigger the use of a featured snippet.

Why everything happens? Photo by Elena.

Ws (Who, What, When, Where, Why) + How questions

Here the Why and How questions attract snippets best of all, as they require more explanation and cannot be easily answered with factoids.

Why-questions usually produce a paragraph-like snippet, like here when I asked "Why are clouds grey?"

How-questions, as a rule, trigger some practical advice, usually showing a list. Here I asked "How to watch a solar eclipse?"

Moreover, snippets for why- and how-questions usually serve as teasers and provoke the users to explore further by clicking the link.

Implied questions

Users usually do not type in the query with a question word but they surely imply it. For example, you may just type "CTR", however, in your head the query sounds like "What is CTR?" Google will also recognize it as an implied question.

Beware, common words will trigger a dictionary entry instead of a featured snippet. So the question that you devise should ask for more specialized knowledge that cannot be reduced to a simple dictionary definition.

A good way to get more ideas on search queries is by consulting "People also ask" box in the SERP.

Now you know what kind of questions trigger featured snippets. You can efficiently build your content around them. 

An easy way to find all possible queries is to use Rank Tracker:

1. Launch Rank Tracker (if you don't have it, you can download SEO PowerSuite's free version here) and create a project for your site.
2. Go to the Keyword Research module and click Suggest Keywords .
3. Pick the Google Autocomplete suggestion method from the list.

By typing or pasting your questions with wildcards to the tool (i.e., what *seo*, how *seo*, etc.) you will receive tons of suggestions related to your keywords.

You can filter your results by the important metrics, like Number of Searches and KEI, and comprise a list of questions that cover your niche.

You can check then that long-tail keywords return the featured snippets, for example, I Googled "why SEO is important":

Research answers

Well, by now you have in mind the variety of the questions that should cover the content that you want to compete with for a featured snippet. The content optimization in this case calls for good old keyword search.

Ahrefs analyzed 2 million featured snippets and extracted top 30 frequently met words in the search queries that trigger featured snippets (stop words excluded). I compiled the most common ones in a list that you can copy right away to the Rank Tracker (Keyword Research -> Suggest Keywords -> Google Autocomplete). Take the ones that are related to your niche and replace with your actual keywords:

Top keywords list takeaway

Rank Tracker is also a good tool to get the ideas for higher volume keywords and, what's more important, long-tail keywords. By pressing the Suggest Keywords button in the Keyword Research module in the app, you will get an array of options that will allow you to highly diversify your search for keywords. You may explore:

• Keywords related to your niche of the market;
• Keywords related to your site and competitors;
• Keywords from other search engines and services;
• Keywords building via word combinations and typos.

Optimize the format

Why this is important? Great content deserves decent wrapping to let Google efficiently pick up the information for the featured snippet. By wise HTML formatting, you can guide Google to the necessary spots to retrieve the data for the answer box.

Moreover, the suitable format may help you either to steal position zero from the page with weaker formatting, or to keep your page on this position — any moment you may lose your snippet to a site coming from nowhere. In case of any of these scenarios, try to check whether everything is in order according to our guidelines below. If your snippet is stolen, try to analyze why Google considered this intruder to be better than your page is and apply the changes to your page accordingly.

Here is what you should pay attention to:

1. Type-wise format: Try to format your target page according to the major types of the featured snippets:

• Paragraphs: Think of the short summary to answer a potential query — Google has a tendency to prefer the answers that begin logically as an answer would do; This single answer paragraph should be about 40-50 words to fit in the answer box. Format this paragraph in a paragraph HTML tag <p>; Put this paragraph right under the heading for the question.
• Tables: Google loves to include tables into the featured snippets, as they are much easier to understand for computers, unlike natural language paragraphs. So when it makes sense, add the tabular data or reformat suitable paragraphs into tables. Mark up the table on your page using the <table> tag. Lists/ Steps: Use a heading tag above the list on your page; Give this list a title that matches the targeted keyword. As Google can make its own lists out of the text instead of snipping the paragraph, you can format your text with subheadings (H2) where it is logical to do so. Then Google will take your subheadings and list them chronologically. Featured snippets of a list type can be tricky in a way that by giving all the steps in the answer box, you discourage users to click the link to your page — they have already got all the necessary information!

Thus, try not to lay all the cards on the table — format the text the way to save some no less important steps from the users' view. In this case Google will give "More items" link. And that is a call to click!

Clear-cut answers

If the content on your page is too long to fit in the answer box, you can chop it up to paragraphs, lists, or tables.

In case you have quite a few target questions, you can add a Q&A Section where all the related questions will be put together with ideally formatted answers.

If your page's content updates regularly, use a "last updated" tag. In this case Google and users understand how current you post is.

Request indexing by Google

Why this is important? We recommend to use Google Search Console to re-crawl your pages. Apparently, this request almost instantly updates Google's index of the page. It means that your page can gain a featured snippet the same day you did re-indexing.

If you feel that your page is well-armed for position 0, follow the procedure:

1. Log in to Google Search Console.
2. Expand the "Crawl" menu and click "Fetch as Google."
3. Put in your page address and click "Fetch":
4. It will be added to the table. Click "Request Indexing":

Useful links:

• link-assistant.com/news/voice-search-guide.html - among other things
• https://www.link-assistant.com/rank-tracker/keyword-research-tool.html - kewword research tool.

Above all, try to stay positive. Photo by Elena: View from the Toronto CN Tower.

Pixel Smartphones

Pixel Smartphones

(Texts ordered by a company which specializes in dealing with electronics).

Pixel smartphones are the first phones to get the latest Android versions, while other Android and Nexus devices have to wait.

The Pixel smartphone supports all Google services, a Google assistant and the Google Daydream virtual reality platform.

The Pixel's closest competitor is the Apple's iPhone 7, but the Google smartphone features the 3.5 mm audio jack.

The Pixel smartphone lacks the proper water resistance. Here it loses to Sony, Samsung and Apple wearables.

The digital image stabilization system in the Pixel’s camera is tied to the gyroscope and motion sensors. 

The Pixel XL's display measures 5.5 in 1440p AMOLED with a 3450 mAh battery (the standard Pixel's display measures 5 inch). 

While active, the Pixel XL's camera is capturing 30 captures per second, the number of frames can be easily and quickly adjustable. 

The Pixel XL's smartphone comes with the unlimited full-resolution Google Photos backup for the whole life of the phone.

Pixel XL supports Google Assistant. Technical support services are integrated into OS and receives Android updates from Google.

Pixel XL is an Android smartphone designed and marketed by Google. Pixel serve as Google's flag devices. Resistance is futile. 

Google Pixel Phone

The two Pixel models are differentiated by screen and battery size; the standard Pixel's display measures 5 in 1080p AMOLED with a 2770 mAh battery while the Pixel XL's display measures 5.5 in 1440p AMOLED with a 3450 mAh battery. 

Google Pixel smartphone has a highly rated smartphone camera and a battery that lasts all day. It’s the first phone with the Google Assistant built in, and it provides live technical support services integrated into the OS. 

According to the official Google Pixel page, both the Pixel and Pixel XL smartphones use an aluminum chassis, with a glass panel on the portion of the 12.3-megapixel rear housing the camera. Both phones use an imprint fingerprint sensor. 

The Pixel and Pixel XL smartphones ship with Android 7.1 "Nougat", an update to 7.0 that was initially exclusive to the Pixel. Google released the OS for existing Nexus phones in December 2016, but certain features remain exclusive to Pixel.device.

We hand evaluate devices sent to us. If we disagree with the condition of the iPhone 4 you want to sell online, the offer may decrease or increase accordingly. In this case we send you an adjustment email with the new value of your iPhone 4. We will explain the reasons of any changes. Photo by Elena.

INC Press-Release

INC Press-Release Template

Our Company Appears at #XXX in General Ranking of the Most Dynamically Developing Companies.

Our Company is proud to move on to a higher level of ranking as part of the most dynamically developing companies in the country this 2018. Last year, the company was at 498 ranking place and this year’s ranking is a huge move that shows the company’s continued success. In addition to its newest ranking, the company is also proud to share a blog that it has been developing.

As a leader in the electronic device industry, (name) wants to share valuable information to all its customers through the blog. Through the blog, (name) can provide their customers with the knowledge of the products available on their site. Besides general information, customers can also find news and reviews about electronic gadgets and apps.

(name) is the Best Place to Buy and Sell Apple Products and All Other Devices.

(Name) is a platform where all brands and models of electronic devices including iPhone, iPad, MacBook, Apple Watch, Mac Pro, and more. The shop provides their customers with a place to sell their used phones and gadgets, allowing them to still get something out of their used devices. (name) is a place where customers who want to upgrade but doesn’t have the cash for it.

By trading it in (name), they can get the best price in exchange for their old devices. The platform also makes it easy to utilize their services through a quick three-step procedure. All that customers need to do is visit the site and follow the instructions. For customers who have plenty of electronic devices they don’t use anymore, (name) is the place that makes it easy to sell and earn fast cash.

To sell old gadgets at (name) customers need only to follow the steps below:

GET INSTANT OFFER – To get an instant offer, the customer enters the specifications of the used electronics. Within seconds, they can get an immediate quote for the device. 

SHIP DEVICE FOR FREE – If the customer decided to sell, they could use the prepaid shipping label provided by the platform for shipping the device to the store.

GET PAID QUICKLY – After shipment,  (name) processes the order once the devices arrive. Customers will then receive their payment as soon as possible. 

(Name) Blog – A Source of Most Relevant Information

In addition to the platform, (name) also has a blog where potential customers can gain valuable information on topics including IT, electronics, Internet, even politics related to the Internet and IT. 

Furthermore, customers can learn practical information on (name)/blog, such as health problems correlated to IT, family budget, and more. 

Some of the information available at the site includes:

• News
• Blogs
• Tips
• How-to’s 
• Reviews, and more

From reviews of the best gadgets to suggestions on how to prevent eye strain, Name has a lot to offer. With the information available at the site, customers can use their devices better, avoid health problems related to overuse of gadgets, learn to protect their data better, and more. In this era dominated by information and technology, practical information on the devices people use is vital. 

Name – A Most Dynamically Developing Company

This year, (name) enjoyed a higher ranking as one of the most dynamically developing companies. It’s a milestone that the company takes pride as a result of their effort to provide their customers with not only excellent service but practical information. Over the past year, the company showed massive growth as a business ready to accommodate the needs of their customers.

This year, (name) promises to continue providing superior service. With the goal of making their customers happy, they make their service even better than before through quicker and safer electronics trading. For anyone who has used devices just lying around their home and in need of quick cash, visiting (name) is the place to go.

Work diligently and you'll earn enough to buy nice stuff.  Photo by Elena.

Complaint Letters

Templates for Complaint Letters

Dear Ms. Frick,

We’re sorry you were disappointed with our service. It was disheartening for us to learn that after you contacted us directly with your concern, you immediately filed a complaint with the Better Business Bureau. We pride ourselves on delivering attentive customer service.

When we received your complaint, we apologized instantly (in less than 30 minutes after you sent us your message) and promised to pay you the amount due in full, including an additional $100 to compensate you for your inconvenience, as soon as you confirm the method of payment. Please note that our apology to you occurred BEFORE the Better Business Bureau posted your complaint.

We've never claimed to be perfect. Like all human beings, we sometimes make mistakes. We believe a person and a company should be judged not by their mistakes, but by their willingness to admit them, learn from them, and improve going forward. This is what we attempted to do in your case.

Our company is actively fighting check fraud and employs multiple security systems. In rare circumstances, our system makes a mistake and blocks legitimate customer checks. It is customer responsibility to notify us about a mistake in seven days. We will reissue the payment and reimburse customer any back fees upon providing a proof of bank charges.

In light of this, we hope you’ll consider contacting the Better Business Bureau to explain the situation and request that your complaint be removed. We feel this would be appropriate under these circumstances, and we would appreciate it.

Once again, we apologize for your hardship. We assure you that we will bring this issue to our CEO’s attention, fully discuss it at our next company meeting, and use it as an opportunity to improve our services.

Sincerely yours,

The Team.

Dear...  (BBB complaint)

The process of inspecting the items we receive is rather complex. We record the whole process: delivery, opening of the package, visual inspection. In some (very rare) cases, f we discover a problem with the device, we inform the customer and we offer him/her the option to re-quote it or to send it back to the customer. If the customer agrees with the re-quoting, he/she is paid accordingly. If not, we send the item back. We never exercise any pressure on the customer and it's completely his/her choice to accept the new quote or to get the item back.  Let us explain that we receive hundreds of items every day and every time we have to re-quote an item, we waste our time, efforts and money. We would be happy if we didn't need to re-quote items and lower their condition. For further information about conditions and re-quoting we can refer to our section Terms of sale - Our company considers the case closed.

Complaint:

I had to spend one hour on the support line before they could explain why did they requote my iPod touch I was selling. I chose a wrong model, so they didn't honor the initial quote of $150 and said they would pay only $120 and if I didn't agree, they would send it back to me. This man was not helpful enough even when I tried to explain that mine was iPod touch 5 and the difference with iPod 6 is minimum. He didn't want to accept it, so they finally paid me 120 instead of 150. They need to care about us, their customers. They will not survive without us.

Answer:

Dear Mr. Frick. Thank you for your input and thank you for dealing with us. Indeed, you inadvertently chose a wrong iPod model. If you go back to our iPod pages and choose the right model of your device, you will see the price we offer for iPod touch is $120, exactly the amount we paid. Sorry, but we can't pay $150 for a model that cost $120. We are all humans and we make mistakes, so we don't blame you for this mistake, we even offer to send the device back free of charge if you don't accept the new quote, even though the mistake was yours. You could ask for the device to be sent back to you and then try to sell it to anyone of our competitors (with all due respect to them, we think they wouldn't pay $120 for this model, and the state the device is in). That's because we care about our customers.

A complaint can be harmful to your karma. Photo by Elena.

Useful sentences and expressions

Sets of words

Some useful sentences and expressions I strongly recommend for creators of content. And I explain my reasons for doing so:

• Sentences like “let's take a moment”, ”I'm not sure it's for you” and other sentences expressing doubt cause the person to think that something is not urgent and not important, can be put on hold. Avoid using them.
• The word “but”: this word makes the person to focus on everything that goes after BUT (for example: your phone used to be perfect, but now you need to change and sell it before it's too late”)...
• Use the word “Open minded”:  ”how open-minded would you be about trying this alternative...” “Would you be open-minded about giving us a chance to help you to get rid of your old device” “How open-minded would you be about increasing your income”, ”how open-minded would you be about”, “How open-minded will be you about at least trying it”. If you use this expression - “open-minded” - the person subconsciously feels obligated to explore some possibilities.
• The set of words “what you know” helps to control the situation, to move the person from position of certainty to one of doubt (he doesn't want to sell online, but after seeing “what you know”, he may change his mind). This set of words moves the person to understand that his rejection is due to lack of evidence or to insufficient evidence: ”What you know about us, the business we do differently”. ”What you know about how everything has changed since...l”, “What you know about benefits”, ”What you now about new approach”, All these questions (what you know) help people realize that their opinion (rejection of our offer) is perhaps not correct.
• The set of words: “How would you feel if...”. Motivation: reasons to move or to do Examples – “How would you feel if the decision to order our services leads to an additional income?”, “How do you feel if you get money from a useless gadget?”, “How would you feel if the next year at this time you would live in a house of your dreams.”..
• “Just One More Thing...” - Makes people smile and feel like doing good thing. Besides, this expression can help us to avoid that a potential customer leaves without a transaction
• The set of words: “Just imagine” helps create the image by telling stories (once upon a time...) When you hear the words « just imagine » some subconscious moment clicks and switches your brain to listen: “Just imagine how things would be when you get an extra-income. “Just imagine how will you feel when you get money for a gadget you don't need anymore”, “Just imagine the look on your kids faces when you achieve this”, “Just imagine the impact this could have”, “Just imagine the smile on your kids faces when you tell them you can allow yourselves to get to”. Or simply “Just imagine the difference...”

Just imagine the world without living creatures... Photo by Elena.

• The set of words “I'm guessing you” (by using this set of words you eliminate their excuses they had in their mind).
• The set of words: “Where would be a good time to”. “When will it be good time to get started (to look at this proposal).
• The set of words which turns the open question into a closed one. An open question: “do you have any question”. Turn it to a closed question - “What question do you have for me?”. Instead of “Can you give me your phone number (appeal to privacy), use “What is the best number I can reach you?” (are you ready to sell... - change by “will you sell it today, in order to get the top price?”
• The set of words which gives potential customer options: you could do this, secondly, you could do exactly nothing, or, third, you could give this a try... What of these three options would be more easy and convenient for you? (these three options make them realize that they have to pick one of these three options). Start with the three options and finish with « what option will be easier for you? » (more convenient for you)
• The set of words: “there are two sorts of people, who listen and those who act”
• The set of words presenting evidence: “We bet you are ready to do something”, “We bet you're a busy person”.
• The set of words “if... that...” “if you don't eat your dinner you'll not get any desert”, “if you don't clean your room, you'll be grounded the weekend”... If a person hears these conditions, chances are this person will believe them: “If you decide to give it a try, we promise that you'll not be disappointed”, or “if you... we are confident that you...”
• Another set of words help to calm the reader: “Don't worry”, “feel confident”, “just relax, we'll help you navigate through the choices” or “Don't worry, we know you are not sure about, but our guidelines will help you easily find the way”...
• The set of words “most people”. We don't press by saying - “you should do that...“. We say “most people would do that in this situation” -  “Most people would grab to the opportunity, as there are no risk...”
• The set of words - “the good news” The good news is that dozens of people came through it and we are here to help you too... this brings more positivity, and you add the words like that's great, etc.àThe set of words: What happens next. (what happens next is...). We don't ask, we state what happens next. (now, just fill in the form...)
• The set of words “What makes you say that?” Questions like this help people overcome an objection (however, we must understand what the objection is). If we ask questions, these questions make people take the responsibility.
• Another set of words: “Before you make your mind up (before it what if we run once again...).
• The set of words “if I can, I will...”
• The word “enough”: would it be enough for you if we pay you more than a competition...
• The set of word which make us look as we are asking for a favor: “perhaps you can do us a small favor”, “you could do us a little favor, couldn't you?”
• The set of words “just out of curiosity”: “just out of curiosity, what is it specifically you want to think about...” “Just out of curiosity, what is that that's stopping you from selling”.
• The last set of words: “So how does it work? - It works great!” We give no details, no explanations, we just state that it works great.

The good news is they are not Goddesses. Picture by Elena.

Link Building Strategy

My text about link building strategies

Here comes the complete list of requirements for the link building:

Links must be inserted in texts, not in footnotes, not in the list of content, not anywhere else. In texts only,

1. The website where you insert a link must be created for visitors, not for SEO or other purposes, they must not be PBN or something of the sort (if you don't understand some of these terms, just google it, and everything will become clear).
2. It would be perfect if the site would be globally dedicated to the subjects related to our company (for a computer seller, the perfect website would be a site about hardware, cellphones, computers, ecology and recycling of used electronics, tips for improving family budget, global problems related to the use of electronic devices, investment in new technologies, and so on).
3. As a rule, the site must show positive dynamics in SEO parameters (today's SEO parameters are better than they were half a year ago, etc. ). 
4. People must actively visit the site. If there are a rather important number of comments on the texts, it would be great, etc. The ideal situation would be if the dynamics get better and better for the last year. But it may be too hard to achieve these goals, so if all the rest can be accepted, you can forget about this requirement.
5. Active presence of American audience is a must, if your company targets only American customers. On other side, if you are looking for visitors from an African country, the site where you buy a link should attract local people.
6. In numbers: Semrush - organic visits must be not less than 10000, and it would be better if the parameters reach 20000 (no matter desktop or mobile). The organic searches should show a permanent increase for at least six months, better if the increase has been observed for a year. There may be exceptions, but you can't accept sites where the visits dropped for more than 50% during the last year. Neither you cannot accept a website with a stable tendency for dropping organic search results. Alexa – the ideal site should appear in top 100К. You can accept websites with lower stats, but not lower than 500К. Audience must come mostly from the country (countries) you are interested in.
7. The site must not be blocked by the owner from being accessed from other countries (a few sites don't allow visitors in other countries to see their sites destined for visitors from specific countries, but Google doesn't like this method). 
8. Majestic TF and CF – the ideal figure would be higher than 20, but not lower than your owns stats on your own website. If your ranking is 12 (TF) и 27 (CF), the site where you buy a link must be not less than twice as higher (24 and 54).  However, it's preferable that TF and CF would be closer to each other comparing the difference (when a website is quoted too much, but its trust is too low, Google may see the situation as an issue).
9. Moz – DA on the site you buy a link must be higher than yours. You'd prefer DA to be higher than 35. 
10. Spam Score : 0-2 is the ideal situation.
11. https and adaptive format are not a must, but you'd prefer if the site has them.
12. An ideal case is a site which has twitter and/or facebook accounts, with 1000+ followers and activity (sharing, likes, comments). If the text with your link inserted is shared by the site in its social networks' account, it would be a great addition and merit a bonus if the site has 1000+ followers.
13. You can take dofollow links on permanent basis. If the site has a good traffic on the subject which interests you, the no follow link can also be used, but these will be rare exceptions.
14. We can't accept subdomains of the site offered by the seller (many offers talk about a website, like, say, ibm.com, but in fact the seller has access to personalblog/myvife/community/ibm.com or ibm.com/developerworks/community/blogs. You can accept a subdomain, if its stats are within the requirements exposed above. But the seller must specify in his (her) proposal that it's a subdomain.
15. The text must be of good quality and the link inserted must be related to the text (you must not accept a link about selling used iPhone inserted in a text about sexuality of crocodiles).
16. You can't accept websites where everyone can sign up, start posting articles and then the administration of the site removes the text without any further explanations.
17. You must be very cautious about those websites which sell links to everyone in any occasion, as they finally will be punished by Google. One of the signs of such a site is that it is offered by dozens of sellers.
18. You should buy links on permanent basis. Yes, sites have the tendency to go away, or change its policy and thus remove some texts, etc. But when you buy a post with your link you expect the text be on the site for at least 2 years. If the texts is no more available before this delay expires, the seller must provide another text, published on another website with the same stats as exposed in this list. Specify these conditions.
19. You can purchase some presence in well-known platforms, such as reddit, quora, etc., but we have very strict special requirements for those platforms.

Rest assured that we never share your private info with any third-party organizations. It’s safe with us. Also, your link is insured in the event it is damaged during shipping. That’s right, we’ve got your back! Photo by Elena.

Templates

Templates of My Texts

Here come some samples of the texts I've written for my clients. Please contact me if you need a good writer.

Dear Madame, Sir

I am the owner of (this company), a company which specializes in buying and reselling used consumer electronics, cellular phones included. We have been on the market for 5 years now and we help people recycle their old devices and save money.

Our company currently buys dozens of cell phones every day. And I am writing to express my deep concern about the situation on the cellular phones markets, as our experience proves that cell phones carriers and manufactures are not doing enough to find ways to stop or at least reduce the criminal activity on the very lucrative illegal cell phones market.

Believe me, we at iGotOffer know what we are talking about. In our opinion, based on our experience, carriers and manufacturers are to blame for this situation, as we (and I suppose, our competition) try to do everything to prevent the theft of cell phones.

What happens? When we buy a used and old cell phone we always try to check if the item has been reported stolen or lost. Even more, we state on our Website that we will never buy a device reported stolen or lost, we will never return it to the seller and we will report to the law enforcement authorities every case of such items. Nevertheless, we receive these items regularly, and unfortunately, there is no secure way to check and tell with certainty that we deal with a stolen phone.

On the contrary, the existent legal conditions accommodate the resale of the stolen phones!

Indeed, each time we receive a cellular phone, we try to communicate with the manufacturer or with the carrier, but each time the decision to disclose the information on the phone depends on the good will of an employee, not on the law or or other regulations.

The process of obtaining information is long, slow and painful. All the carriers systematically refuse to give information about the phone's unique identifying number. The carriers have never added their databases of stolen cell phones to public access. The situation is the same with the manufacturers. For example, Apple Computers Inc. has assured us that they report all the unique identifiers to an « « « « Association » » » » which is supposed to share its database with customers. However, when we tried to obtain information, they denied that they ever had such database, and they insisted that they have never got any information from Apple Computers regarding stolen or lost iPhones.

Our experience shows that the carriers and manufacturers are not interested in collaborating with companies which have suspected cell phones in their possession ( for example, a thief sent them a device trying to sell it as a legitimate item). Every time we try to determine if an item has been reported stolen, we run into the wall of indifference.

We ask therefore that the Attorney General Office examines the situation in order to adapt legislation making illegal for the carriers and manufacturers to refuse public access to their database concerning identifiers of the items reported lost or stolen. The situation requires urgent action given the level of crime surrounding cell phones.

Sincerely yours,

the x Company owner.

We take great pride in our testimonials. Nothing makes our day like hearing a customer say, “Thank you for helping us...” Photo by Elena.

Net Worth

Net Worth

From I Love Capitalism – An American Story by Ken Langone, cofounder of The Home Depot.

When I was ten years old, I was an altar boy at St.Mary's Church in Roslyn, just across the harbor from the sand pits. The priest, Father Francis Ryan – Father Frank – came from Ireland, spoke with a brogue, and had a boxer's nose: he really had been a boxer. Does it sound like a Spencer Tracy movie yet?

I've always been spiritual, and I loved being an altar boy. The hours were challenging, though. When it was my turn to serve the 6:30 Mass for the week, I had to get up at six every morning from Monday until Saturday and walk about a mile to a spot underneath the railroad bridge at Roslyn Road, where Mr. Harnett, the church sexton, would pick me up in his little Ford Model A and drive me the remaining two miles to St. Mary's. I remember the smell of the pipe Mr. Harnett smoked and the fragrance of the inside of the church, a combination of incense and the wood of the pews and the bindings of the hymnals.

Weekdays I'd serve Mass, then walk back up the hill and go to school. But on Saturdays I had to walk all the way home – three miles. Once I took a ride from my uncle Pat, my father's oldest brother, and his wife, my aunt Agnes. My aunt scolded me the whole way about why my mother and father didn't go to church. I never took a ride from the again.

Spadina Avenue, Toronto, Graffiti. Photo by Elena.

I've always felt that some of the worst people in the world go to Mass regularly, while some of the best people in the world never set foot in church. I attend Mass every Sunday, and try to make daily Mass as often as I can. I have a routine every morning: I get up and brush my teeth and, still in my pajamas, go off in a quite corner of the house for twenty minutes with my Bible and a Bible study guide and pray.

I don't know if there's a God or if there's a heaven; I can't prove it, but that's what I believe. There's one part of me that thinks, when you're dead, you're dead. You had your shot; move on. But if there isn't a God, what have I lost by praying? Nothing. It's a no-downside bet.

The first part of my prayer is that when I'm presented for my judgment, our Creator will have concluded that for the most part I've lived my life according to His teachings, and Scripture. I then ask that in the hereafter I'll be reunited with all those people I loved and admired who left before me. I then pray for those who have lost loved ones or have problems: people I can help. I say, “God, let me always do it for your praise, honor, and glory – not mine.”

I know spiritually isn't for everybody, but for me it's been an incredibly motivating factor. God is the most important parе of everything I do.

Ken Longdone

Chicken Salad and Lemonade

From I Love Capitalism by Ken Longdone

You noticed. I originally named my little start-up Invemed because I was so fascinated by the health-care field, and now here I was, in 1976, up to my ass in the home improvement business. And happy to be there.

Contradictory? Sure! Life is full of left turns, and I've taken quite a few of them, following my nose, which has very often pointed me in the right direction. The truth is I can't help myself: I am a deal junkie. If the phone rings, I'm like the proverbial firehouse dog – off to the races. Who knows who might be calling? More often than not, it's someone who has a very interesting business proposition. Doesn't matter what kind of business it is.

Handy Dan was ab extremely interesting business proposition in 1976. And Bernie Marcus, I soon found out, was very much a kindred spirit. Oddly enough, ha had started his business career in the health-care field, as a Rutgers-trained pharmacist: this was how he came to Daylin in the first place. Then two friends of his, Amnon Barness and Max Candiotty, knowing that Bernie understood merchandise and markups and service, asked him to go take over this little home-improvement start-up. Which, as we've seen, Bernie turned into a big success, despite the failures of the parent corporation.

After I took my position in Handy Dan, Elaine and I became friends with Bernie and his wife, Billi. Every January, I used to rent a house in Palm Springs to play in the Bob Hope golf tournament, and Bernie and I would golf there together. As we walked the course, we would inevitably talk shop, and Handy Dan continued to fascinate me. I began visiting the stores often, in California and Arizona (where they were called Angels Do-It-Yourself Centers), in Denver and Kansas City and Houston.

I love capitalism. Photo by Elena.

I used to love to go to store openings: they always seemed to exciting and hopeful. One Thursday in the fall of 1976 – grand openings typically happened on Thursdays, with lots of newspaper and TC ads and hoopla, to get momentum going for the weekend – I joined Bernie at the christening of a new Handy Dan in Houston. And Bernie and I were walking around the store when I saw something in the paint department that knocked my socks off.

It was a big display, depicting two cans of paint, one Handy Dan's house brand and the other a competitor, Sherwin-Williams or Glidden. The display showed the percentage of each can that was pigment and the percentage that was thinner: the more pigment, the better the quality. And here was graphic evidence that not only did the house brand have more pigment than the competition, but the prices were better. Oh boy, I thought that was wonderful.

It was a big display, and the new store was a very big store, thirty-five thousand square feet. Every place I went in it, I saw similar displays and signage, showing how this Handy Dan was going to educate and service the customer. Soon I was literally bouncing up and down; I thought this was the greatest thing I'd ever seen. 

I Love Capitalism

I Love Capitalism

An American Story

By Ken Langone

Supply and demand goes through everything in life. Early on I caught the fact that if you have a special talent, or if you have something unique that provokes people to do something that you can make a profit on, that's a good thing. Every two weeks while I was at Bucknell, my dad used to send me a $16 check for spending money: eight bucks a week. A big stretch for him and a tough budget for me. Man, I had to go out and kill to eat. But necessity is the mother of invention.

Late in my freshman year, I'd hit on an idea. I remembered that as soon as they'd get to Bucknell as freshmen, a lot of the rich kids (practically anybody who wasn't me was rich) were buying stationary with their names printed on it or the Bucknell seal on it. Some guys waited until they pledged a fraternity, then put the emblem of their fraternity on it. I thought, “How could I make some money selling stationary?”

The light-bulb went on. Freshman orientation! For orientation at Bucknell, you had to wear a beanie and a kind of sandwich board – two sheets of white cardboard, one on your chest and one on your back, connected by a couple of pieces of string over your shoulders – with your name and hometown printed on each side. It was a little humiliating: That was part of the point. The first coupe days you're there, you haven't met anybody yet, and you're melancholy; you miss your high-school friends, they've all gone someplace else. I thought that would be my moment to strike.

Magic Wand. Illustration by Megan Jorgensen (Elena).

L.G. Balfour was a company in Massachusetts that made college rings and caps and gowns, and they also had a stationary division. Before I started my sophomore year, I got them to send me samples, and I put the samples on a piece of cardboard; I got all set up a week before freshman orientation. As soon as the freshmen arrived, I'd go into their dorms with my sample board and say, “Look, you're going to be writing a lot to your friends.” I'd remind them that a long-distance phone call was sixty-five cents for three minutes; that was a lot of money then. I'd say, “Let's see you have how many friends? Ten? You're going to write them two-three times a week?”

They're nodding. I can see they're homesick and blue. “Okey,” I'd tell them. “Here's what you'll need for your freshman year, but you get a price break if you order enough.” I guess you might say I was exploitative.

I made damn sure I got their check or money order right away, and here's why. Within two weeks after they got to school, they'd forgotten their friends at home, they'd made new friends, they were going to rush a fraternity; writing letters was the last thing on their minds. I had guys tell me year later: “You son of a bitch, I still have boxes of the f... stationary.”

Suddenly Supply and demand was more than a theory to me.

Bank Certificates and Tax-Exempt Money-Market Funds

Bank Certificates and Tax-Exempt Money-Market Funds

Bank Certificates

Banks also offer certificates of deposit with a variety of periods to maturity. Yield on these instruments are typically higher than those on either money-market deposit accounts or money funds. These certificates are government insured up to $100,000 per buyer (double with your spouse). Thus, the certificates are even safer than the money funds and are an excellent medium for investors who can tie up their liquid funds for at least six months.

The certificates do have a number of disadvantages, however. First, you need to have a substantial nest egg – usually $10,000 – before you can buy. Second, you can't write checks against the certificates as you can with shares in the money funds. Most important, as in other aspects  of life there is a substantial penalty for premature withdrawal. If you redeem your certificate prior to maturity, federal regulations stipulate a minimum penalty of the loss of one month's interest. Some banks impose even greater penalties. Fourth, the yield on bank certificates is subject to state and local taxes (Treasury bills, also obtainable for $10,000, are exempt from these).

The two steps in any action – finding your risk level and identifying your tax bracket and income needs – seem obvious. But it is incredible how many people go astray by mismatching the types of securities they buy with their risk tolerance and their income and tax needs. The confusion of priorites so often displayed by investors is not unlike that exhibited by young people who are often torn by a confusion of priorities. You can't seek safety of principal and then take a plunge with investment into the riskiest of common stocks. You can't shelter your income from high marginal tax rates and then lock in returns of 10 percent from taxable corporate bonds or certificates, no matter how attractive these may be. Yet, the annals of investment counselors are replete with stories of investors whose security holdings are inconsistent with their investment goals.

Financial Jungle. Photo by Elena.

Tax-Exempt Money-Market Funds

This instrument may be useful for some investors, particularly those who pay taxes at the top marginal rate and who live in states with high income-tax rates. A disadvantage of all the vehicles is that the interest is fully taxable. Investors in very high brackets will find that, after taxes even the highest of the yields offered will not compensate for inflation. This situation led to the establishment of the first tax-exempt money-market fund, the Vanguard Municipal Bond Fund short-term portfolio.

Vanguard invests in a portfolio of short-term, high-quality, tax-exempt issues. It thus produces daily tax-exempt income. Like the regular money-market funds, it provides instant liquidity and free checking for large bills, with rather high minimum investment. There are now several tax-exempt money funds. The yields on tax-exempt funds are considerably lower than those on taxable funds. Nevertheless, individuals in the highest tax brackets will find the earnings from this investment more attractive than the after-tax yield of the regular money funds.

If you live in a state which has high income-tax rates, you may want to consider a fund that only holds securities issued by entities within your home state. Tax-exempt bonds issued, for example, by New York municipalities are taxable in other states. Thus, the only way for, say, a Californian to avoid both federal and state taxes is to buy a fund that holds only California securities. Fortunatley, there are now tax-exempt money funds (as well as bond funds) available that invest in the securities of a single state. There are not available for all states. You should call one of the mutual-fund complexes such as Fidelity or Vanguard to check on the availability of a fund that invests in securities of the state in which you pay taxes.

Money-Market Deposit Account

Money-Market Deposit Account

The money funds became so popular that hundreds of billions of dollars were drained out of bank deposits into these higher-yielding mutual funds. Needless to say, the banks sought ways to compete. And so, in another example of how deregulation benefits the consumer, the banks were allowed to offer money-market deposit accounts to individuals. At the out-set banks offered promotional rates that were well above the yields offered by the money funds. Indeed, initially some money-market deposit accounts had a yield advantage of 2 percentage points. Savvy consumers, chasing the pettiest rate in the market, deserted the money funds in droves.

In the mid-1980s, however, the money funds enjoyed renaissance. The banks, having reestablished themselves, quietly reduced the rates they were offering so that the money funds then had a ½ to 1 percentage point advantage over the deposit accounts. Money began to return to the funds and now both types of investments have hundreds of billions of consumers' dollars.

How should you decide between the two? Each has its own advantages. The banks enjoy important attractions. First, like other bank deposits, money-market deposit accounts are insured by an agency of the federal government. Thus, they score at the top of the scale for worried insomniacs. In addition, it's convenient to invest in money-market deposit accounts, since banks have branches, while money funds only have post office boxes and toll-free telephone numbers. But the money funds have their own advantages. Their yields tend to be a good deal higher than the bank accounts, as noted above. Indeed, during periods when interest rates have been rising, the differential in favor of the money funds has tended to widen as the banks have been slow in raising posted rates.

In addition, the money funds allow an unlimited number of checks to be written against balances (although each check must be written for a determined sum as a minimum, depending on the fund). The deposit accounts allow only three checks per month (for any amount. Bank do offer so-called Super NOW deposit accounts that allow unlimited checking and these accounts can be very useful for investors who can meet the minimum deposit requirements. The interest rates on Super NOWs are, however substantially below the returns on money-market deposit accounts).

Money funds also offer wire transfer facilities that permit money to be moved around overnight. Moreover, since money funds are typically part of a large mutual fund or brokerage complex, they are an ideal place to “park” cash at high earning rates awaiting movement into more permanent investments. Finally, it is possible to find that invest only in tax-exempt securities so that high-bracket investors can earn considerably higher after-tax yields.

One of the best ways to obtain extra investment funds is to avoid taxes legally. Photo by Elena.

Financial Paradox

Financial Paradox - Some Reflections

Today, closed-end funds are no longer an especially attractive investment opportunity. They illustrate however an important paradox about investment advice, as well as the maxim that true values do eventually prevail in the market. There is a fundamental paradox about the usefulness of investment advice concerning specific securities. If the advice reaches enough people and they act on it, knowledge of the advice destroys its usefulness. If everyone knows about a "good buy" and they rush in to buy, the price of the "good buy" will rise until it is no longer particularly attractive for investment. Indeed, there will be pressure on the price to rise as long as it is still a good buy.

This is the main logical pillar on which the efficient-market theory rests. If the spread of news is unimpeded, prices will react quickly so that they reflect all that is known about the particular situation. This led us to predict that such favorable discounts would not always be available, and we would be very surprised to see the levels of discounts perpetuate themselves indefinitely. For the same reason we are skeptical that very simple currently popular rules such as "buy low P/E stocks" or "buy small company stocks" will perpetually produce unusually high risk-adjusted returns.

There is a well-known academic story about the random walk of a finance professor and two of his students. The finance professor, a proponent of the strongest form of the random-walk theory, was convinced that markets were always perfectly efficient. When he and the students spotted a $10 bill lying on the street, he told them to ignore it. "If it was really a $10 bill," he reasoned out loud, "someone would have already picked it up." Fortunately, the students were skeptical, not only of Wall Street professionals, but also of learned professors, and so they picked up the money.

Montreal, Old Port, random-walkers... Photo by Elena.

Clearly, there is considerable logic to the finance professor's position. In markets where intelligent people are searching for value, it is unlikely that people will perpetually leave $10 bills around ready for the taking. But history tells us that unexploited opportunities do exist from time to time, as do periods of speculative excess pricing. We know of Dutchmen paying astronomical prices for tulip bulbs, of Englishmen splurging on the most improbable bubbles, and of modern institutional fund managers who convinced themselves that some stocks were so "nifty" that any price was reasonable. And while investors were building castles in the air, real fundamental investment opportunities such as closed-end funds were passed by.

Yet eventually excessive valuations were corrected and eventually investors did snatch up the bargain closed-end funds. Perhaps the finance professor's advice should have been, "You had better pick the $10 bill up quickly because if it's really there, someone else will surely take it." It is in this sense that we must consider ourselves random walkers. We are convinced that true value will out, but from time to time it doesn't surprise that anomalies do exist. There may be some $10 bills around at times and we should certainly interrupt our random walk to purposefully stoop and pick them up.

It is clear that the ability to beat the average consistently is very rare. Neither fundamental analysis of a stock's firm foundation of value not technical analysis of the market's propensity for building castles in the air can produce reliable superior results. Even the pros must hide their heads in shame when they compare their results with those obtained by the dart-board method of picking stocks. The only way to achieve above-average returns in an efficient market is to assume greater risk. But risk is far from a simple concept and neither beta no any other single risk measure is likely to be adequate.

Sensible investment policies for individuals must then be developed in two steps. First, it is crucially important to understand the risk-return trade-offs that are available and to tailor your choice of securities to your temperament and requirements. Most investors will not be convinced however, that the random-walk theory is valid. Telling an investor that there is no hope of beating the averages is like telling a six-year-old there is no Santa Claus. It takes the zing out of life.

High Park's blues sakura flowers. Photo by Elena.

For those incurably smitten with the speculative bug, who insist on picking individual stocks in an attempt to beat the market, we can offer some rules. The odds are really stacked against you, but you may just get lucky and win big. We also suggest that you might want to place your bets on the few rare investment managers who, at least in the past, have shown some talent for finding those rare $10 bills lying around in the marketplace.

Investing is a bit like lovemaking. Ultimately it is really an art requiring a certain talent and the presence of a mysterious force called luck. Indeed, luck may by 99 percent responsible for the success of the very few people who have beaten the averages. "Although men flatter themselves with their great actions," La Rochefoucauld wrote, "they are not so often the result of great design as of chance."

The game of investing is like lovemaking in another important respect, too. It's much too much fun to give up. If you have the talent to recognize stocks that have good value, and the art to recognize a story that will catch the fancy of others, it's a great feeling to see the market vindicate you. Even if you are not so lucky, strict rules will help you limit your risks and avoid much of the pain that is sometimes involved in the playing. If you know you will either win or at least not lose too much, you will be able to play the game with more satisfaction. At the very least, we hope these recommendations make the game all the more enjoyable.

Law of Supply and Law of Demand

The Law of Supply...

Sure, average air fares have risen steadly since 1990, but they go up and down at the same times year after year, and that makes predicting prices a cinch. Experts put togteher the numbers that show what you always suspected : Fares are lowest during the dspring and summer when the airlines have the most difficulty filling their planes.

... And the Law of Demand

Is this week's fare half of what you paid last week? Here's what to do:

You've already bought your ticket when you see the ad in the newspaper: a lower fare on the same route. Getting your ticket rewritten for the lower fare – and pocketing the savings – is not always possible. First you must meet all the qualifications listed in the ad in the small print: there must be the right numbers of days in advance of your trip: you must have been booked to travel when the fare applies; and there must still be seats available in the cheaper fare category. Even then, you might be charged a fee to have your ticket rewritten.

Don't give up if the first airline person who answers tells you your ticket is non-refundable and non-changeable, though. Insist on speaking with a supervisor. Also, move fast. The number of seats available at the lower fare is probably limited. Even if you meet all the restrictions, you will not be able to claim one of the cheap seats unless they are still unsold when you call.

A travel agent can give you further assistance. Some agents now guarantee you the lowest fare through use of a computer that monitors reservations systems overnight. Your agent may call you when a lower fare pops up. (You certainly won't hear about it from the airline). If the agent is still holding your tickets, he or she could rewrite your ticket at the new price even before you open your morning paper.

Horizons far away. Photo by Elena.

Insurance

Insurance

When people think about finance and financial institutions, their minds most often focus on banks, but insurance companies are also financial business entitities and insurance comprises a large part of finance. For example, in Canada, some of the largest insurance companies include Standard Life, Manulife Financial, Sunlife and Industrial Alliance, all handling billions of dollars, some on a yearly basis.

Also, mergers and acquisitions are typical in the insurance industry. On a more practical note, insurance is known to most people as, more often than not, mandatory, car insurance; home insurance and life insurance. For instance, when a new homeowner buys a house, he or she must not only ensure the mortgage (provided there is a mortgage on the house) with a corresponding life insurance, but also insure the house and its contents. Typically, standard home insurance includes coverage for civil liability, as well as the property and the contents.

The contents are valued by the insured, but it remains advisable to keep receipts and/or photographs of valuables, jewelery, furniture, electronics, designer handbags and other expensive items in case a claim must be filed. By the same token, standard insurance clauses include theft, fire and water damage, but as with all contracts reading the fine print may save one a lot of time and money in the long run. Additional coverage may be purchased if desired, which is usually discussed with the insurance broker or sales agent at the time of purchase. Interestingly, a person with a criminal record may be denied life or home insurance. Similarly, and naturally, a falsely filed insurance claim is a serious criminal offense and in addition to being prosecuted under the law precludes one from getting insurance in the future.

Fun is like life insurance; the older you get, the more it costs (Kin Hubbard, an American cartoonist). Illustration: ©  Pizza Pasta. New York. Photo by Elena.

Alternatively, life insurance quotes differ significantly based on the amount insured. Of course, similar to mortgages, pesonal income from employment and other sources, as well as, total wealth and assets are taken into account when calculating the amount available to the insured person.

The premium is the amount paid at regular intervals (usually bi-weekly, monthly or annually) by the insured on the policy (the insuranc contract). Along these lines, the beneficiary is the person to whom the funds (the amount of the insurance to be paid in the case of death of the person’s whose life is insured) will go to, after the insured person’s death; but, the beneficiary may also be the insured’s estate. Moreover, insurance coverage may also be joint, such as in spousal or family contracts, or in cases of business partnerships. Finallly, the term annual premium should not be confused with annuity, which is a different contract an individual may enter into with an insurance company, which guarantees him or her an income in case of disability, or simply represents a form of income under several conditions and in exchange for payment.

Managerial Measures

Managerial Measures

Any introductory accounting course will explain that assets and expenses have a debit balance; while liabilities, income and equity have a credit balance. Subsequently, here are some of the basics of managerial accounting.

Corporations usually have a decentralized structure. Therefore, the division of a company can be a cost, profit or investment center. As their names indicate, the cost centers only incur costs, the profit centers revenues and costs, and the investment centers have control over cost, profits as well as invested funds. The distinctions come in handy in responsibility reports; obviously, it would be unfair to judge a manager based on circumstances absolutely outside his or her control. Hence, the controllable margin (CM = the amount of profit remaining after all variable but only controllable fixed costs have been deducted) is used in judging management’s performance. The judgment is based on whether there were any discrepancies from budget, and if so, were they favourable or unfavourable. A word of caution: at the corporate level all costs are controllable by top management, so CM becomes interchangeable with operating income (OI).

The emphasis on costs is clear from the economic underlying principles. Since a free market is regulated by demand and supply, in a competitive market a firm is a price taker and its only way to secure a profit is to control costs (i.e. target cost = market selling price – desired profit). Of course, these constrictions are lifted if a business is a perfect monopoly.

Managerial measures needed. Photo by Elena.

Return on investments (ROI) is calculated by dividing CM or OI by the average operating assets. For purposes of convenience the assets are averaged over the year. Another measure is residual income (RI), which is obtained by subtracting from the CM or OI, the minimum required rate of return (RRR) multiplied by the average operating assets. In a sense, it is a better measure than ROI because since any investment project with an ROI > RRR will increase the firm’ income, it would be deemed acceptable, an alternative often foregone if the overall ROI is decreased. However, the method lacks precision in that RI can be equal for two options greatly differing in amounts invested.

Asset turnover is computed by dividing sales by average operating assets, whereas to get the profit margin one divides the OI by sales.  Other popular measures are return on assets (ROA = OI /Total assets) and return on equity (ROE = OI/Shareholder’s equity).

Gross profit, also called gross margin, refers to sales minus cost of goods sold. The contribution margin equals sales minus variable costs. One of the main aspects to remember about fixed versus variable costs, is that fixed costs must be covered by the company whereas it is producing (manufacturer) or selling (merchandiser) anything or not.

Accounting: Facts and Literature

Accounting: Facts and Literature

Becoming a professional accountant is no easy task, however there are several pathways to achieve the coveted designation. Before, there were three designations: CA, CGA and CMA. Now, the three certifications have been blended in the CPA designation. A student with a degree with an accounting major can enrol in the CPA PEP program, while a student with a degree in another field may enrol into the CPA PREP program. Overall, there exists several modules, which must be completed with a certain minimum grade in order to eligible for the PEP program. The courses may be taken at CPA learning, or at accredited colleges and universities. But what is accounting? Below follows a brief review of some facts currently of interest to the accounting literature.

What effects does accounting conservatism have on financial statements and financial statements users? Ruch and Taylor (2015) analyzed several studies to answer the question. The authors defined accounting conservatism as a “downward bias in accounting of the net asset value relative to the economic asset value” (p. 20). In other words, accounting conservatism is expecting the worse, magnifying losses and considering profits unlikely. Further, conservatism may be conditional or unconditional, depending on whether financial news are incorporated into the calculation and reporting. Further according to the paper, conditional conservatism reduces earnings persistence and predictability, while unconditional conservatism is conducive to earnings management because of hidden reserves.

Alternatively, more research is needed to shed light on whether conditional conservatism in accounting facilitates earnings management through the “big bath”. The “big bath” is a term that describes the practice in accounting of making bad results even worse. Thus, the increase from one year to another appears more dramatic resulting in bigger bonuses for the company’s management. Also, new CEOs sometimes use this technique to blame the firms shortcomings on the previous CEO. Moreover, there appears to be a relationship between conditional conservatism and information asymmetry.

Jo-Vin as an expression of New York. Photo by Elena.

Ball & Sadka (2015) stress the importance of studying aggregate earnings. The authors state many interesting facts about earnings at the firm-level, for example that firms with higher earnings growth have higher stock returns as well, but the analysis is complicated by research conducted at the aggregate level. The relationship is of interest to investors in analyzing stocks they hold. Interestingly, the authors show that contemporaneous annual aggregate earnings are negatively correlated with aggregate returns, while a positive correlation is found for firm-level comparisons.

A recurring problem in accounting is earnings management, when deliberately false information is misrepresented in financial reports. The issue arises because of the agent-principal dilemma. Top management is interested in bonuses and salary increases, but they typically do not own the firm. Thus, they are tempted to misrepresent financial data through manipulation to make themselves look better in shareholders’ and company owners’ eyes. Researchers agree that portfolio diversification may attenuate the risk.

Another topic often discussed in accounting literature, namely corporate social responsibility (CSR) is often analyzed and cited. For instance, Huang and Watson (2015) discuss the matter and define CSR as a firms actions driven to achieve some social good beyond the interests of the firm. An example could be a bank becoming more green or environmentally friendly, not as required by law, but simply engaging in the endeavour on a purely voluntary basis to further a social good.

While some may think that accounting is boring, studying accounting and its academic literature may be quite fascinating. Hopefully, the present short essay briefly touches on some accounting facts. Going into more detail is beyond the scope of the present paper.

References:

• Huang, X. B. & Watson, L. (2015). Corporate social responsibility research in accounting. Journal of Accounting Literature, 34: 1-16.

• Ruch, G.W. & Taylor, G. (2015). Accounting conservatism: A review of the literature. Journal of Accounting Literature, 34: 17-38.

• Sadka, G. & Ball, R. (2015). Aggregate earnings and why they matter. Journal of Accounting Literature, 34: 39-57.