Profit Smoothing

Profit smoothing is a strategy companies use to make their financial results appear more consistent over time. By adjusting or timing certain expenses and revenues, they aim to reduce the natural ups and downs caused by seasonal changes, market conditions, or one-time events. This helps create a steady pattern of profits, which can boost investor confidence and make financial performance easier to predict. However, it can sometimes give a misleading picture of a company's true financial health if not transparently disclosed.