How firms hit their numbers by any means necessary: Marty Fridson

All of these examples are reminders that we should scrupulously examine the facts every time a company claims to have achieved a milestone.

College track and field recruiters would not hand out a scholarship to a high school sprinter who set a state record by moving the finish line closer to the starting line. Investors should be every bit as careful when they are doling out money.

Channel-stuffing is another way of making the numbers say what management wants. In 2001, pharmaceuticals producer Bristol-Myers Squibb BMY.N gave its wholesalers discounts as incentives to purchase its drugs at a faster rate than necessary to fill prescriptions at pharmacies.

That action did not increase sales, which would have been a financially rational motive for offering a discount. It merely shifted sales from a future period to the present to inflate current earnings.