Final answer:
Anethical dilemma arises for company management when they feel pressured to manipulate accounting rules to show favorable net income due to. capital markets demands.
Step-by-step explanation:
The possibility that the capital markets' focus on periodic profits may tempt a company's management to bend or even break accounting rules to inflate reported net income is an example of an ethical dilemma. This is because it involves a choice between what is right (following proper accounting practices) and the pressure to meet market expectations for financial performance. Companies need to access financial capital, and they may choose different methods like issuing bonds or stock. While issuing bonds requires regular interest payments, issuing stock does not oblige the company to make payments but may dilute control as the public becomes part-owner and the company must answer to a board of directors and shareholders.