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Window Dressing

Window Dressing

Engaging in transactions at the end of a financial period that will enhance your financial statements or allow them to be viewed in a more favorable light.

Let’s say there are three mutual funds that buy conservative stocks. Fund C has much better results than the others. Upon close inspection you find that Fund C buys risky stocks and stock options. The day before the annual and semi-annual statements are compiled Fund C sells its risky investments and buys very conservative investments so that the owners won’t know that their superior returns are due to a risky portfolio. This would be a case of window dressing. Sometimes companies temporarily pay off debt or book receivables early to make their financial statements look better.

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