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Ethics vs profits; net income vs cash flow; TVM economic impact

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1. Why do many business managers feel that ethical behavior is essential to the profitability and survival of their firm?

2. What are the similarities and differences between net income and cash flow? Is it possible to have positive net income and negative cash flow? If so, how?

3. How do you think the time value of money concepts relates to the stimulus package passed by Congress last year? Please focus on the economic impact and not on the political!

4. When McDermott International Inc. announced a few years ago that its chairman and CEO would soon retire and that it had hired an investment banker to review its strategic alternatives, its share price rose 9.5%. Securities analysts had been critical of the chairman, and the firm's performance had lagged behind that of its competitors. What signals did the announcement convey?

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Solution Summary

Ethics versus profits, net income versus cash flows and the time value of money economic impacts are examined.

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Answer 1

Importance of Ethical Behavior

In the modern organization, the ethical behavior of manager plays an important role in the management accounting and to enhance the organizational profitability. The ethical behavior of manager includes honesty, integrity, fairness, and accountability that are important for the success of a business. The profit maximization is the main objective of any firm and it has several goals to achieve this objective (Hansen & Mowen, 2006). The ethical behavior of managers encourages the employees to work hard and gives their best performance to achieve the cost targets that helps to increase profitability of the firm. The ethical behavior of manager is essential in today's business environment to serve as role model for all employees and to meet the standards (Ireland, Hoskisson & Hitt, 2008).

The ethical behavior of manager is also essential for the survival of an organization. The survival and competitiveness of a firm requires meeting some challenges like employee's motivation and management of diverse work force. The behavior of manager plays an important role to motivate the employees by implementing the appropriate ethical action. On the other hand, the lack of integrity between the employees can affect the effectiveness and strength of the firm. The strategic leaders are always work against the opportunism and fraudulent because both can affect the firm. In this situation, the ethical behavior within the organization ensures the proper coordination and effective strategic implementation that are necessary to increase profitability and survival of the firm.

Answer 2

Similarities and Difference

The net income and cash flow have some similarities like both are used to ...

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