Financial Management
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Atlantis Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Andy, the owner of Atlantis, has decided that he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. He told them he would allow them until the end of February to pay for the purchases, just as if they had made their purchases in January.
What do you think are the ethical implications of Andy's actions? (1 to 2 paragraphs)
Which ratios will be improved by accelerating these sales? (1 Paragraph)
Would you advise Andy to proceed with this plan? Why or why not? (1 to 2 Paragraphs)
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Solution Summary
The response addresses the queries posted in 744 words with references.
Solution Preview
The response addresses the queries posted in 744 words with references.
// The following paper deals in clarifying the role of earnings management in accelerating sales and improving the financial statement ratios. Before commencing with answering the questions, the earnings management has been defined.//
Earnings Management is defined as the art of selecting of an accounting method, which can either be able to maximize the management aptitude or could be economically efficient (Ronen & Yaari, 2007). The management makes deliberate use of this strategy in order to fetch a pre-determined target set for the company by manipulating its gross earnings.
// After stating the definition, we would now, emphasize that whether the actions undertaken by Andy of calling his best customers to make purchases and pay later, were ethically implied.//
Inviting the best customers by Andy can be called ethical because, he took this step far before anybody could raise questions for and the issues could have become public. Andy did not become frustrated in absence of sales generation. Despite, he showed his concern, which could help in making adjustments to make the results meet that had been forecasted. He was desperate to pin-point the drawbacks and present unconventional route of exploiting a keep way risk attitude with ...
Education
- MBA (IP), International Center for Internationa Business
- BBA, University of Rajasthan
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