Cook The Books

Loading the player...

What does 'Cook The Books' mean

Cook the books is a buzzword describing fraudulent activities performed by corporations in order to falsify their financial statements. Typically, cooking the books involves augmenting financial data to yield previously non-existent earnings.

Examples of techniques used to cook the books involve accelerating revenues, delaying expenses, manipulating pension plans and implementing synthetic leases.

BREAKING DOWN 'Cook The Books'

During the first couple of years of the new millennium, large Fortune 500 companies such as Enron and WorldCom were found to have been cooking the books to improve their financial figures. The resulting scandals gave investors and regulators a rude awakening concerning the reality that companies were hiding the ugly truth between the lines of financial data.

In order to rally investor confidence, the Sarbanes-Oxley Act of 2002 was created. This act of Congress created policies to protect investors against future incidents of corporate fraud.

RELATED TERMS
  1. Order Book

    An electronic list of buy and sell orders for a specific security ...
  2. Public Book (Of Orders)

    A book containing all of the buy and sell orders for a specific ...
  3. Cooke Ratio

    A ratio that calculates the amount of capital a bank should have ...
  4. Synthetic Lease

    An operating lease that is structured in a way so that it is ...
  5. Trading Book

    The portfolio of financial instruments held by a brokerage or ...
  6. Sarbanes-Oxley Act Of 2002 - SOX

    An act passed by U.S. Congress in 2002 to protect investors from ...
Related Articles
  1. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  2. Investing

    Cooking The Books

    To spot the signs of earnings manipulation, you need to know the different ways companies can inflate their figures.
  3. Professionals

    Tim Cook Leads Apple Into A Record-Breaking 2015 (AAPL)

    Understand the differences between Tim Cook and Steve Jobs. Learn if the perceived differences makes Cook a good or bad leader and CEO.
  4. Budgeting

    How Cooking At Home Can Save You Real Dough

    Cooking at home saves time and money but most importantly, it could even help lower future health costs.
  5. Investing News

    Is Apple's New COO Jeff Williams Heir Apparent?

    Jeff Williams was promoted to become Chief Operating Officer, a position occupied by Tim Cook before he became CEO, at Apple yesterday. Who is he?
  6. Stock Analysis

    Can Tim Cook Replace Steve Jobs? (AAPL)

    Looks at the similarities and differences between current Apple CEO Tim Cook and his predecessor, the iconic and mercurial Steve Jobs.
  7. Markets

    Financial Statement Manipulation An Ever-Present Problem For Investors

    The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors.
  8. Markets

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  9. Personal Finance

    Detecting Financial Statement Fraud

    Find out how to tell if a company is manipulating its financial data, so you don't invest in the next Enron.
  10. Investing Basics

    How Financial Statements Are Manipulated

    Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
RELATED FAQS
  1. What is Tim Cook's career and educational background? (AAPL)

    Discover where Tim Cook studied and worked before joining Apple and what roles he played in the company before taking over ... Read Answer >>
  2. What is Tim Cook's managerial style? (AAPL)

    Find out why Tim Cook's managerial style could be broadly defined as democratic. Cook appears to have developed a uniquely ... Read Answer >>
  3. How did Tim Cook become head of Apple?

    Learn about the experiences that landed Tim Cook the CEO position at one of the largest and most powerful technology companies ... Read Answer >>
  4. What advice has Tim Cook given to would-be business leaders?

    Learn what Apple CEO Tim Cook had to say to the business leaders of the future during an address at Duke University's Fuqua ... Read Answer >>
  5. How does Tim Cook's vision for Apple differ from that of the late Steve Jobs? (AAPL)

    Since Tim Cook took control of Apple in 2011, the company has taken a different approach to product releases, expansion and ... Read Answer >>
  6. What is the difference between book value and market value

    Learn the differences between book value and market value, and see how investors use each type to determine if a company ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center