Aside from insider trading, what companies will do is find loop holes in the accounting system and the accountants are essentially responsible for creating financial statements or at least auditing them to confirm they’re right. Though I do want to clarify that a company won’t actually make a profit (individuals will); they’ll typically make their stock more attractive, which drives the market price up as demand for that stock increases, then the execs can sell their stock at an artificially inflated price – depending on their vesting options.
Talk to an accounting friends/student/professional for different ways this is done. In all the accounting classes, they tell you how to do this so you know what to look for and can call attention to it.
For example, earnings per share is a ratio that the layman will look at (erroneously) to gauge whether or not the stock is worth buying. Earnings per share is calculated by dividing the net income by the total shares outstanding (example below). However, total shares outstanding does not include what’s called “treasury stock” (which is stock that a company buys back to limit how many shares are “outstanding”). Well, if you’re following me here…if the company decreases the number of shares outstanding, then the earnings per share will go up. So in this example, they manipulated a key ratio that will drive demand and increase the price per share. This is one of the really easy things to spot and most companies can justify buying back stock to keep better control over internal operations so it doesn’t get frowned on as much. There are way more technical ways to manipulate financial statements.
Net Income: $100
Shares outstanding: 50
Earnings per share: $2.oo
If I buy back 25 shares of stock, it becomes treasury stock and now there are 25 shares outstanding.
NI: $100
SO: 25
EPS: $4.oo
I don’t know how in depth you want it to go in your play, but hopefully this helps or at least points you in a direction. Go to a book store and just read a few pages in an accounting book to see how they do this.
There are surely other ways to manipulate stocks, but financial data altering is the most common. It’s how SOX came about.