I am looking for insight on the following hypothetical question.
Beckham Sports' need to improve its cash flow may have lead to delaying payment to a small vendor, James, very dependent upon Beckham Sports. How does Beckham Sports balance the ethical issue of possibly putting James out of business with its need to improve its own cash flow?
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Beckham Sports' need to improve its cash flow should be ethically balanced with the fact that its delays in payment would put James out of business.
Beckham Sports' cash flow needs should be examined with the industry norm Does Beckham pay its creditors much earlier than the industry norm. If that were the case then Beckham has the moral right to pay James on the date when he would have received his payment from elsewhere in the industry. Still, it would be morally upright to call up James beforehand, discuss the cash flow problem of the company with him and inform him of the impending delays in payments. If he has insurmountable problems he should be given a moratorium in which he can make alternate arrangements for his own working capital. Beckham Sports' may help him procure finance for his own working capital. The additional factor that is not mentioned is that such small vendors are dependent on larger companies because the larger companies are also dependent on such small vendors for purchases at very competitive prices. So moral principles apart, usually it is important for the companies like Beckham Sports to ensure that James does not go out of business.
In the second situation, where the credit period already received by Beckham Sports ...
Here is just a sample of what you'll find in this solution:
"Beckham Sports has many other ways of increasing its cash flow. The most obvious is to decrease the credit it gives to its customers and to make its sales in cash. The other strategic methods of increasing the cash inflow are..."