ETHICAL DILEMMA"We must get it," Erickson Santos, president of Industrial Fasteners, roared. "Without it,we're in big trouble." The "it" Mr. Santos referred to is the renewal of a P20 million loan withManila First Bank. The big trouble he fears is the lack of funds necessary to repay the existingdebt and few, if any, prospects for raising the funds elsewhere.Mr. Santos had just hung up the phone after a conversation with a bank vice-president inwhich it was made clear that this year's statement of cash flows must look better than last year's.Mr. Santos knows that improvements are not on course to happen. In fact, cash flow projectionswere dismal.Later that day, Timothy Dela Cruz, assistant controller, was summoned to Mr. Santos'soffice. "Dela Cruz," Santos barked, "I've looked at our accounts receivable. I think we cangenerate quite a bit of cash by selling or factoring most of those receivables. I know it will costus more than if we collect them ourselves, but it sure will make our cash flow picture look better."Required:Discuss the following:1. Facts of the case2. The ethical issue and the stakeholders3. Values involved4. Alternative course of actions5. Evaluation of alternatives in terms of values6. Possible consequences of alternatives7. Decision

Ethical dilemma refers to the situation when there is a problem in the process of decision making in…

Answered: "We must get it," Erickson Santos,…

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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Use this information for questions 9 to 12: You are put in charge of starting a credit card business for a bank. This is what you've learned so far: Your boss wants you to get to $10 million in outstanding loans within a year. It costs you $75,000 a year to employ a risk officer to approve or deny loan applications. You need two loan collectors, paid $50,000 each. Your salary is $125,000 a year. The bank is paying depositors 1%, in line with the inflation rate. You can change the credit card interest rate any time you want. You expect 6% of your customers to default each year. 9. You need to charge your credit card customers % to cover the costs of running the business. 10. Yes No. You need to charge your customers to cover the risk of a rise in future inflation. 11. You expect your dollar losses for customer defaults to be $ a year. 12. The minimum amount you need to charge the credit card customers per year to break even is: (A) (B) 8% 10% (C) (D) 12% 15%
It is the policy of the corporation to maintain current ratio of 1.5 to 1.0. Its current liabilities are 400,000 and present current ratio is 2 to 1. How much is the maximum level of new short term loans it can secure without violating the policy? a• 400,000 b• 533,333 c• 200,000 d• 300,000
You are the owner of four Taco Bell restaurant locations. You have a business loan with Citizens Bank taken out 60 days ago that is due in 90 days. The amount of the loan is $70,000, and the rate is 9.5% using ordinary interest. You currently have some excess cash: $45,000. Due to situations beyond your control, you, as the owner, must make an immediate business decision now to pursue only one of these two choices:1) sending all of the $45,000 to Citizens Bank as a partial payment on your loan, or2) using the $45,000 to purchase serving supplies such as food containers, cups, and plastic dinnerware for your inventory. This is the last day to take advantage of the opportunity to save some money due to a special discount price that is "10% off" the normal cost of $45,000 for these items. Consider these calculations: (A) How much interest (in $) will you save on this loan if you make the partial payment and don't purchase the additional serving supplies? (Round your answer to two…
Mf2. The treasurer of a small bank has borrowed funds for 3 months at an interest rate of 5.50% and has lent funds for 9 months at 6.50%. The total amount is USD25 million. To cover his exposure created by the mismatch of maturities, the dealer needs to borrow another USD25 million for 6 months, in 3 months’ time, and hedge the position now with an FRA. What is the treasurer’s break-even forward rate of interest, assuming no other costs?
5. How Banks Work Suppose a group of investors pooled €500,000 and founded Floyds Bank in Belgium. Floyds Bank used €50,000 of this to purchase shares in the FTSE 100 company Experian PLC. With the remaining €450,000, the bank manager purchased a building, furniture, and equipment for the bank. Use the preceding information to complete the following table showing Floyds Bank's balance sheet. Floyds Bank's Balance Sheet Assets Liabilities and Net Worth Building, furniture, and equipment € 450,000 Net worth 500,000 Shares in Experian PLC 50,000 Total € 500,000 Total € 500,000 Now Olivia Griffiths opens a new current account at Floyds Bank and makes an initial deposit of €150,000 in currency. Fill in the following table to show Floyds Bank's balance sheet just after Olivia's deposit. Floyds Bank's Balance Sheet Assets Liabilities and Net Worth Building, furniture, and equipment V € 450,000 Cash € 150,000 Demand deposits € 150,000 Net worth € 500,000 Shares in Experian PLC 50,000 Total €…
You are the owner of four Taco Bell restaurant locations. You have a business loan with Citizens Bank taken out 60 days ago that is due in 90 days. The amount of the loan is $50,000, and the rate is 9.5% using ordinary interest. You currently have some excess cash: $35,000. Due to situations beyond your control, you, as the owner, must make an immediate business decision now to pursue only one of these two choices:1) sending all of the $35,000 to Citizens Bank as a partial payment on your loan, or2) using the $35,000 to purchase serving supplies such as food containers, cups, and plastic dinnerware for your inventory. This is the last day to take advantage of the opportunity to save some money due to a special discount price that is "10% off" the normal cost of $35,000 for these items. Consider these calculations: (a) How much interest (in $) will you save on this loan if you make the partial payment and don't purchase the additional serving supplies? (Round your answer to two…
You are working hard to pay off your debts. You had 3 $1,000 credit cards maxed out but just paid off one and closed it. Which factors are impacted? What could you have done instead? Show your calculations.
W3.Part 2 – You have $10,000 to invest. Your Grandmother, who doesn’t trust banks, has advised you to put the money under your mattress to save for the future. Conversely, your Mother suggests you open a savings account at a bank. In your town, the banks are currently offering 3% interest. One bank (Bank A) compounds the interests each quarter (March 31, June 30, September 30, and December 31). The other bank (Bank B) compounds the interest on an annual basis (December 31). Assuming you would save your money for the next 10 years, what would your balance be in Bank A and in Bank B? Please describe your calculations within your response.
A bridge was damaged by an earthquake. Asclepius Inc. was contracted by the government to repair the bridge. Asclepius Inc. needs P1,650,000 for 30 days to pay wages and buy supplies. A bank lends them the funds at an 8% rate. How much cash is needed to repay the bank after 30 days? Use a 360-day уear:
A3)

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