Final answer:
The correct option for altering decisions to affect cash flows and net income is 'd. Accounting earnings management.' This process involves adjusting financial statements to present a certain financial health of the company, which is often done to influence investor perceptions favorably.
Step-by-step explanation:
When companies alter decisions to affect cash flows and net income over a period, they are engaging in accounting earnings management. This practice involves the manipulation of financial statements to present a desired picture of the company's financial health and performance to stakeholders, including investors and creditors. These adjustments to financial figures can be achieved through various methods, such as changing depreciation methods, recognition of revenues and expenses at strategic times, or using allowances for future costs.
Firms raise the financial capital needed for investments like machinery, new plants, or research projects in four primary ways: from early-stage investors, by reinvesting profits, by borrowing through banks or bonds, and by selling stock. When making these decisions, executives aim to optimize short and long-term cash flows to maintain stability and growth. However, when they engage in earnings management, they are trying to smooth out fluctuations in net income to make the company appear more profitable or stable than it might actually be, often to influence the perceptions of current and potential investors.
This kind of manipulation can have serious implications. If a business takes on too much debt to finance its growth, it could face troubles if income levels do not increase to cover the debt payments. Moreover, frequent earnings management can damage a company's reputation and lead to legal consequences if it crosses the line into fraudulent reporting.