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A new CEO significantly writes down the value of assets which drastically reduces profits and then blames this on the previous CEO. This is an example of
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- What is one of the ways that accounting is used to direct and control the manager of a corporation? a.Threatening to tell shareholders a mangers income if a manager makes a ‘poor financial’ decision. b.Linking of a mangers performance to a bonus that depends on accounting profit. c.Making decisions based on the accounting information regardless of managerial input. d.Using income smoothing to assure a manager that they can invest in a low risk investment.Several managers in your company are experiencingpersonal financial problems and have asked that yourcompany switch from LIFO to FIFO so that they canreceive bigger bonuses, which are tied to the company’snet income. How would you respond to this request if youwere the company’s chief financial officer (CFO)? Wouldsuch a switch help the managers? Who could it hurt?What disadvantages do you see if the chief executive officer (CEO) is primarilyconcerned with short-term ROI?
- Identify the major problems in this situation and explain how they impact the organization. You will need to consider both behavioral and analytical factors. Specifically, how might managerial accounting concepts, tools, or techniques be applied to help resolve this dilemma? What are possible consequences of applying the same to this dilemma? Briefly explain Orange Electronics has been experiencing declining profit margins and has been looking for ways to increase operating income. It cannot raise selling prices for fear of losing business to its competitors. It must either cut costs or improve productivity. The company uses a standard cost system to evaluate the performance of the soldering department. It investigates all unfavorable variances at the end of the month. The soldering department rarely completes the operations in less time than the standard allows (which would result in a favorable variance). In most months, the variance is zero or slightly unfavorable. Reasoning that…Which of the following best describes the potential impact of business risk on Earnings Quality? Select one: a. Business risk is mostly composed of financial risk factors and it has minimal effect on earnings quality. b. Higher earnings quality is linked with companies more insulated from business risk. While business risk is not primarily a result of management’s discretionary actions, this risk can be lowered by skillful management strategies.' c. A higher level of earnings quality can be observed in the industries with high business risk, because higher risk means higher returns d. For managing business risk, the managers almost have no discretion, therefore business risk is not directly or indirectly related to earnings quality.CEO compensation design is effective in controlling the behavior in their decision making. How a compensation package could possibly work in adjusting a CEO’s risk taking behavior (in investments) and in balancing long-term vs. short term interests of a company?
- Many financial managers and corporate officers are often criticized for (a) poor decisions, (b) lack of ethical behavior, (c) large salaries, (d) lucrative severance packagesworth millions of dollars, and (e) extravagant lifestyles. Is this criticism justified? Justify your opinion.Is there a good argument against giving long-term shareholders more say in running a corporation? Briefly explain. A. Giving long-term shareholders more influence would give the board of directors too much power. B. Long-term shareholders may place more emphasis on costs rather than generating revenue. OC. Giving long-term shareholders more say could limit the ability of other investors to discipline corporate managers who fail to use profit-maximizing strategies. D. It could be argued that giving long-term shareholders more say could attract too many outside investors.Short-term thinking can be disastrous for a business. What indicators are there to show that financial managers at Range take long-term approach to financial performance and control?
- Which one of the following actions by a financial manager creates an agency problem? Lowering selling prices that will result in increased firm value Agreeing to expand the company at the expense of stockholders' value Borrowing money when doing so creates value for the firm Agreeing to pay management bonuses based on the market value of the firm's stockWhat are some of the non-financial factors you would consider if you were faced with a decision related to keeping or terminating a business segment? Can you think of a time when you experienced a dropped segment? Were there consequences other than financial that affected the company?In a strategy meeting, the computer manufacturing company's president said, "If we raised the price of our product, the company's break-even point will be lower." The financial vice president responded by saying, "The company will also be less likely to incur a loss." As a management accountant would you agree or disagree with these statements and why?
