Working Capital Strategies which conflict with good ethics
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What ethical implications arise as a result of an organization employing various working capital strategies to realize long-term opportunities.
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Solution Summary
The solution briefly explains why a good working capital ratio is important in order to to pursue opportunities, but then it goes on to list 14 possible situations where actions taken would improve working capital on paper, but might not be ethical transactions. The 14 conditions are not overt fraud, but more like manipulation to achieve desired results.
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It's an interesting question and I've seen it a couple of times in the last few days. I doubt if there is a textbook answer but in thinking about it, I may have some ideas of situations where working capital strategies and ethical behavior might collide for negative effects.
A favorable working capital ratio is important inside the company for liquidity to pursue opportunities, and also important to stakeholders outside the company (including bankers and shareholders). Working capital results from profits and good management of current assets and liabilities. Yes, we know that, but what are the ways in which working ...
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