Examples of Unethical Situations in Business
Exxon
When it comes to defining the instances of unethical decisions made by companies worldwide, the case of Enron is, perhaps, the most obvious one to bring up. By carrying out a series of financial fraudulences, the organization falsified the results of the audits. The resulting loss in $74,000,000, which the shareholders involved suffered, triggered major repercussions for the organization, in terms of both legal responsibility and its reputation (Exxon fined $3.4bn for ‘fraud’, 2001).
Lehman Brothers
Credited as the world’s most unethical company, Lehman Brothers has also been known as a financial fraud for quite long. The scandal that set off the company’s destruction, however, occurred in 2008, when the company decided to cover its loans under the guise of sales (Lehman Brothers CEO arrested for accounting fraud, 2014). The financial fraud was carried out by selling the company’s solid toxic waste to the Cayman Island banks.
Trevose Fitness Center: Raising Capital
Corporate Investors
The idea of using corporate investors as a financial resource is rather reasonable, as the above-mentioned investors will share the company’s liabilities. However, there is a consistent threat of being tricked by the partner.
Banks
On the one hand, being dependent on a certain bank means facing certain restrictions in financial transactions. On the other hand, banks will provide the company with the required amount of money instantly.
Financial Ratios Comparison
Although the idea of comparing the financial ratios of one company with another is a very popular approach towards the analysis of the company’s potential and its chances for succeeding in the target market, it often proves inefficient. The specified phenomenon occurs because the companies in question may use different accounting methods. As a result, the ratios differ significantly in the characteristics that they provide, and, therefore, become rather misleading (Brigham & Ehrhardt, 2014).
Trevose Fitness Center: Expansion Goals
Mergers and Acquisitions
Often viewed as the basic method for a company to expand into the global environment, mergers and acquisitions allow for becoming stronger and more influential. However, it is essential to make sure that the partner is financially and strategically reliable (Brigham & Ehrhardt, 2014).
Creation of a Chain
The leader of the Trevose Fitness Center may consider the idea of designing a chain of facilities an option. The leadership style, however, should be altered to the laissez-faire one to provide more room for specific decisions (Brigham & Ehrhardt, 2014).
Time Value of Money and Corporate Managers
Enhancing TVM: Shareholders Involved
Reconsidering the significance of the shareholders involved and getting the priorities in the communication with the latter in line is one of the most efficient strategies for boosting TVM (Brigham & Ehrhardt, 2014).
Enhancing TVM: Timing the Cash Flow
Splitting the cash flow process into stages and carrying out analysis thereof is another efficient strategy, which will help understand the core processes that trigger an increase of the cash flow (Brigham & Ehrhardt, 2014).
Analysis of Sinking Funds
Sinking Fund: Pros
The fact that a company is capable of locating the key risks in advance and developing the strategies that will possibly help handle the risk in question is an obvious advantage (Brigham & Ehrhardt, 2014).
Sinking Fund: Cons
The early acquisition of the bonds and the following negligence of the issues related to the company’s interest payments, however, is a major step backwards in developing the organization’s financial policy (Brigham & Ehrhardt, 2014).
References
Brigham, E. F., & Ehrhardt, M. C. (2014). Financial management (14th ed.). Mason, OH: South-Western Cengage Learning.
Exxon fined $3.4bn for ‘fraud’. (2001). BBC News. Web.
Lehman Brothers CEO arrested for accounting fraud. (2014). Daily Currant. Web.