II. Lois Kenseth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately intheir criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation's CEO. She decidesthat buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a "good" offer. Kenseth knows the corporation's cash position is decent, so it has the cash to complete the transaction. She also knows the purchaseof these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated bydividing net income available for the common shareholders by the weighted-average number of shares outstanding. Therefore, if thenumber of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.) Instructions Answer thefollowing questions.a. Who are the stakeholders in this situation?b. What are the ethical issues involved?c. Should Kenseth authorize the transaction?-11-

This scenario involves Lois Kenseth, the CEO of Sycamore Corporation, who is facing the challenge of…

Answered: II. Lois Kenseth, president of Sycamore…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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aren Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her company’s working capital policy considering a recent scare she faced when RR’s corporate banker, citing a nationwide credit crunch, balked at renewing RR’s line of credit. Had the line of credit not been renewed, RR would not have been able to make payroll, potentially forcing the company out of business. Although the line of credit was ultimately renewed, the scare has forced Johnson to examine carefully each component of RR’s working capital to make sure it is needed, with the goal of determining whether the line of credit can be eliminated entirely. In addition to (possibly) freeing RR from the need for a line of credit, Johnson is well aware that reducing working capital can also add value to a company by improving its EVA (Economic Value Added). In her corporate finance course Johnson learned that EVA is calculated by taking net operating profit after taxes (NOPAT) and then subtracting…
W17-2 Shirley Yu, president of SY Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation's CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a "good" offer. Yu knows the corporation's cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated by dividing net income available for the common shareholders by the weighted-average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.) Instructions: Answer the following questions. (a) Who are the stakeholders in this situation? (b) What…
H7. Lois Kenseth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation's CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a “good” offer. Kenseth knows the corporation's cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated by dividing net income available for the common shareholders by the weighted-average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.) (a) Who are the stakeholders in this situation? (b) What are the ethical issues involved?…
It is said of Gary Cohn, former chair of Goldman Sachs and advisor to the Trump presidency, that while “[p]inning blame for the world’s financial crisis of 2008 on one man or one bank would not be fair, . . . Gary Cohn and his entourage at Goldman Sachs is a good place to start.” At Goldman Sachs, Cohn aggressively promoted subprime mortgages and other dubious financial instruments. Knowing that these financial instruments were likely to fail, he and his cronies walked away with hundreds of millions of dollars in bonus money and stock options. His behavior cost his company billions and the world economy trillions of dollars in value, and earned him a place in Donald Trump's inner circle. Of course, Cohn was only one of many crooks to walk away rich from the financial crisis of 2008.questions: 1. Why was Cohn able to operate his fraud for so long? Why did people continue to trust him with their money right up until his frauds were exposed? 2. What happens to financial markets where…
Assume that you are a portfolio manager for a large insurance company. The majority of the moneyyou manage is from retired school teachers who depend on the income you earn on their investments. You have invested a significant amount of money in the bonds of a large corporation andhave just received news released by the company’s president explaining that it is unable to meetits current interest obligations because of deteriorating business operations related to increasedinternational competition. The president has a recovery plan that will take at least two years. During that time, the company will not be able to pay interest on the bonds and, she admits, if the plandoes not work, bondholders will probably lose more than half of their money. As a creditor, youcan force the company into immediate bankruptcy and probably get back at least 90 percent of thebondholders’ money. You also know that your decision will cause at least 10,000 people to losetheir jobs if the company ceases…
The management of Blanche Inc. controls 58% of the company’s stock. The firm did not meet any of its quarterly sales projections for the last year. Some of the firm’s institutional investors are worried that the firm’s poor performance is partly because management has not been focused on maximizing shareholder wealth. Which of the following measures would the institutional investors most likely want to see implemented? They would want to make sure the company has a restricted voting rights provision. They would want to make sure the company’s charter contains a shareholder rights provision. They would want the company to ban targeted share repurchases.
The Beasley Corporation has been experiencing declining earnings but has just announced a 50 percent salary increase for its top executives. A dissident group of stockholders wants to oust the existing board of directors. There are currently 13 directors and 40,000 shares of stock outstanding. Ms. Wright, the president of the company, has the full support of the existing board. The dissident stockholders control proxies for 19,801 shares. Ms. Wright is worried about losing her job. a-1. Under cumulative voting procedures, how many directors can the dissident stockholders elect with the proxies they now hold? Note: Do not round intermediate calculations. Round your answer down to the nearest whole number. Number of directors a-2. How many directors could they elect under majority rule with these proxies? ○ One ○ Two O Three O Four ○ None b. How many shares (or proxies) are needed to elect seven directors under cumulative voting? Note: Do not round intermediate calculations. Round your…
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