Accounting statements of the firm have inflated inventory
Not what you're looking for?
I have a problem to solve: I am the newly named CEO of a large Fortune 500 company. This company has been publicly traded on the NYSE for many years and is well known with the average investor. The company is currently having a difficult time with its earnings.
I have discovered that the accounting statements of the firm have inflated inventory, thus making the firm look more profitable than it is. What is my next step?
Purchase this Solution
Solution Preview
No matter what you, as CEO, decide to do, it is a taught call. In most cases, when financial information is restated, the company's publicly traded stock will suffer on the market. For example, take Nortel Network - when the firm had to restate their financial information, the stock plummeted, causing havoc with investors.
<br>
<br>Now, before you go public with the information that inventory was inflated there are very important internal audits that need to take place.
<br>
<br>Firstly, a physical count of the inventory should take place to verify if the inventory was inflated or not. Once this is determined, I need to make sure that the same accounting principles were used now. There are a few methods of accounting for inventory - LIFO and FIFO being the two biggest ways. Perhaps FIFO (first in, first out) method was used before, and now you were using LIFO. In accounting, a very important principle is ...
Purchase this Solution
Free BrainMass Quizzes
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Operations Management
This quiz tests a student's knowledge about Operations Management
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.