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I am looking for insight on the following hypothetical question.

Beckham Sports’ need to improve its cash flow may have lead to delaying payment to a small vendor, James, very dependent upon Beckham Sports. How does Beckham Sports balance the ethical issue of possibly putting James out of business with its need to improve its own cash flow?


A company president asks the controller to recalculate the statement of cash flows to see if it is possible to meet the requirement for the board to declare a cash dividend. The Board requires that the annual operating cash flow (net cash provided by operating activities) exceed $ 1 million. The president tells the controller, “I know you won’t let me down.” The controller reclassifies a $ 60,000, 2-year note payable listed in the financing activities section as “proceeds from bank loan”. He reports the note instead as “increase in payables” and treats it as an adjustment of net income in the operating activities section.

(a) Who are the stakeholders in this situation?

(b) Was there anything unethical about the president’s actions? Was there anything unethical about the controller’s actions?

(c) Are the Board members or anyone else likely to discover the misclassification?

1.How might people from different parts of the world approach decision making?

2.How do you address ethics in your decision making?

3.When are group decisions better than individual decisions? When are they not better?

4.Speaking of differences based on where we come from or live: In the USA normal body temperature is 37 degrees Celsius. In Russia it is 36.6 degrees Celsius. Why is it so?


Jack owns a small factory that produces buttons for garment industry. Jack wants to buy a new machine and has applied to a bank for financing. The loan officer has asked for operating statements for the past year. The company’s net income has not been very good over the last year, and inventory has grown substantially. Jack is concerned that the bank will not loan the money as they will not be as optimistic as he is about Jack’s future sales and the company’s ability to reduce its inventory. Yesterday Jack had the following conversation with the company’s controller.

Jack: You know that I have applied for a bank loan and that the bank wants copies of our operating statements for the last 12 months.
Controller: I can have those ready for you today.
Jack: I would like you to make some changes before you prepare those statements.
Controller: what changes?
Jack: I want you to increase our predetermined overhead rate by 25% and then recalculate the inventory figures and last year’s income statement using the new rate. Also, move my salary and our office rent into the manufacturing overhead pool. I will need those statements in the morning.

1.What effect would the change in predetermined overhead rate have on the company’s inventory values?
2.What effect would the reclassification of Jack’s salary and the office rent have on the company’s product costs?
3.What parts of a financial statement would reveal Jack’s changes to the loan officer?

Topic of the chapter: Bribes and extortions of business

Case: I am the U.S. manager of a subsidiary in a developing country. When you come back to the U.S. after home leave, the curb check-in attendent at LAX airport points out that the 4 boxes of documents and one suitcase you are asking him to check in exceed the two pieces of luggage you are allowed without charge. His hand, however looks suprisingly open. Do you dill it? why or why not?