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What does it mean to window dress the financial statements?

Window dressing occurs when the executive team takes specific action just to improve the health of the company on the financial statements. Now, it may depend on what exactly investors or shareholders want to see from the company when they report their financial results.

As the visual below illustrates, if shareholders want to see revenue growth, then the company could offer massive discounts to increase sales in the short-term. The issue is that this is misleading as heavy discounting does not allow for sustained revenue growth.

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