ethics in the workplace 8

Then, read the Ethics Challenge Case 1-7 on page 63 in your text. Answer the following questions below.

Question 1: What made the CEO decide on reporting only the 4 ratios?

Question 2: What are the possible consequences of the CEO’s reporting decision?

Question 3: As controller, what advice would you give the CEO regarding his/her disclosure?

Question 4: What actions would you advise the company to take now? (and going forward)

Just do response each posted # 1to 3 down below only.


Posted 1

Good evening classmates,

Question 1: What made the CEO decide on reporting only the 4 ratios? The CEO only wanted to report on those four ratios, because they all show steady improvements from each previous year.

Question 2: What are the possible consequences of the CEO’s reporting decision? If a potential investor was only given these four ratios, they would most likely want to invest in Tallman Company. These four ratios would allude you to believe that everything for the business is looking up. Sales are up, costs are down, assets are being used well, and the company can easily pay their current debts, which means me as a potential investor should see a nice return on my investment (Subramanyam, 2014, p. 63).

Question 3: As controller, what advice would you give the CEO regarding his/her disclosure? As a controller, you have the ethical responsibility to ensure that your company reports fairly and accurately, and that means the good data with the bad data. For an investor or a creditor, they need all of the financial data to make an informed decision. By only providing partial data, you are deceiving the users of the data of the true financial picture of Tallman Company.

Question 4: What actions would you advise the company to take now? (and going forward) The controller has the responsibility to inform the CEO that ethically, Tallman Company must report all of the data, not just the positive data. By not reporting all the data, Tallman Company’s reputation could be damaged, which means it will be harder to raise outside sources of funding moving forward. Acting ethically, they must show the good and the bad, to show that they are reporting faithfully and accurately, in order to boost their credibility and be considered a reliable investment and a company to do business with.

Posted 2

The CEO of Tallman Company clearly chose to report on those four ratios because they are improvements over prior years. The ratios show positive, upward trends for the company. A significant possible consequence for the CEO’s reporting decision is misleading the board of directors, potential and current investors, and financial analysts regarding the overall financial health of the company. As controller, I would advise the CEO to present all financial statement information and calculated ratios as well as explanations for varying increases and decreases within the financials. It is the CEO’s responsibility to keep the board of directors informed about the company and potential future financial issues that may arise as a result of current company, market, or industry downturns. Actions for the company to take now include comparing financial ratios to competitors within the same industry, thoroughly examining the reasons for declining ratios or margins, and developing short-term and long-term plans for improvement in areas such as operating efficiencies or increasing sales.

Posted 3

Question 1: The CEO may have decided on only reporting 4 ratios because the other ratios may reveal the real status of the business. Some ratios may reveal that a business is doing good but when other ratios are computed, it may turn out that the business is not doing as good as the first ratios depicted.

Question 2: Possible consequences may be getting removed from the CEO position due to the fact that she is leaving out material information.

Question 3: I would tell the CEO to release all information available. At the end of the day, it is the right thing to do. Omitting important information could get her in trouble and possibly fired.

Question 4: Actions that should be taken now are to write the CEO up. Going forward the CFO needs to be with the CEO when dealing with situations as such. The CFO can help the CEO better articulate the situation and explain the reasoning behind some of the ratios that are not very attractive. If the CFO is there, he or she can relieve the CEO of any uncertainty when explaining the ratios.

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