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Mind the gap

07 August 2017

Large investors fear FTSE 100 companies are using clever accounting techniques to trigger high executive bonuses and mask poor financial performance, reports the FT today.

New research from investment company AJ Bell shows that the difference between stated and adjusted operating profits for the top quoted companies stands at 51%. This is the biggest gap in a decade and in 2007 the split stood at 15%.

AJ Bell’s Russ Mould said: “As growth gets harder to generate, there is a temptation to employ different financial tactics to generate it, either to appease return-hungry shareholder s or hit bonus triggers. “He went on: “If a share price suddenly turns and the economic cycle turns with it, investors will be left wondering why something that looked like a sound investment on paper is now a terrible one in reality.”

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