menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

As the new, heavily recruited CEO of a high-technology start-up backed by several of Silicon Valley's leading venture capitalists, Chuck Campbell is flying high—great job, good salary, stock options, and a chance to be in on the ground floor and build One Of the truly great twenty-first- century organizations. Just a few days into the job, Chuck participated in a presentation to a new group of potential investors for funding that could help the company expand marketing, improve its services, and invest in growth by the end of the meeting, the investors had verbally committed $16 million in funding. But things turned sour pretty fast. As Chuck was leaving at about 9 p.m., the corporate controller, Berry Mars, who had just returned from an extended leave, cornered him. He was surprised to find her working so late, but before he could even open his mouth, Betty blurted Out her problem: The numbers that Chuck had presented to the venture capitalists were flawed. "The assumptions behind the revenue growth plan are absolutely untenable," she said. "Not a chance of ever happening." Chuck was stunned. He told Berry to go home and that he’d stay and take a look at the figures. At 11 p.m., Chuck was still sitting in his office wondering what to do. His research showed that the numbers were indeed grossly exaggerated, but most of them were at least statistically possible (however remote that possibility was). However, what really troubled him was that the renewal income figure was just flat-out false— and it was clear that one member of the management team who participated in the presentation knew that it was incorrect all along. To make matters worse, it was the renewal income figure that ultimately made the investment so attractive to the venture capital firm. Chuck knew what was at stake—no less than the life or death of the company itself. If he told the truth about the deceptive numbers, the company's valuation would almost certainly be slashed and the $16 million possibly canceled. On the Other hand, if he didn't come clean now, the numbers didn't pan out, and the investors found out later that he knew about the flawed numbers, the company could be ruined. Say nothing about the false numbers. Of course, the company will miss the projections and have to come up with a good explanation, but, after all, isn't that par for the course among fledgling high-tech companies? Chances are, the whole thing will blow over without a problem.

BuyFindarrow_forward

Management, Loose-Leaf Version

13th Edition
Richard L. Daft
Publisher: South-Western College Pub
ISBN: 9781305969308

Solutions

Chapter
Section
BuyFindarrow_forward

Management, Loose-Leaf Version

13th Edition
Richard L. Daft
Publisher: South-Western College Pub
ISBN: 9781305969308
Chapter 6, Problem 1ED
Textbook Problem
1 views

As the new, heavily recruited CEO of a high-technology start-up backed by several of Silicon Valley's leading venture capitalists, Chuck Campbell is flying high—great job, good salary, stock options, and a chance to be in on the ground floor and build One Of the truly great twenty-first- century organizations. Just a few days into the job, Chuck participated in a presentation to a new group of potential investors for funding that could help the company expand marketing, improve its services, and invest in growth by the end of the meeting, the investors had verbally committed $16 million in funding. But things turned sour pretty fast. As Chuck was leaving at about 9 p.m., the corporate controller, Berry Mars, who had just returned from an extended leave, cornered him. He was surprised to find her working so late, but before he could even open his mouth, Betty blurted Out her problem: The numbers that Chuck had presented to the venture capitalists were flawed. "The assumptions behind the revenue growth plan are absolutely untenable," she said. "Not a chance of ever happening." Chuck was stunned. He told Berry to go home and that he’d stay and take a look at the figures. At 11 p.m., Chuck was still sitting in his office wondering what to do. His research showed that the numbers were indeed grossly exaggerated, but most of them were at least statistically possible (however remote that possibility was). However, what really troubled him was that the renewal income figure was just flat-out false— and it was clear that one member of the management team who participated in the presentation knew that it was incorrect all along. To make matters worse, it was the renewal income figure that ultimately made the investment

so attractive to the venture capital firm. Chuck knew what was at stake—no less than the life or death of the company itself. If he told the truth about the deceptive numbers, the company's valuation would almost certainly be slashed and the $16 million possibly canceled. On the Other hand, if he didn't come clean now, the numbers didn't pan out, and the investors found out later that he knew about the flawed

numbers, the company could be ruined.

Say nothing about the false numbers. Of course, the company will miss the projections and have to come up with a good explanation, but, after all, isn't that par for the course among fledgling high-tech companies? Chances are, the whole thing will blow over without a problem.

Summary Introduction

Case summary:

Chuck is a newly recruited CEO of a startup. He makes a presentation to the investor and they commit verbally to provide $16 million funding, impressed by the numbers in the presentation. However Chuck is informed by his Betty that the numbers are exaggerated. From his further research on this, he understood that she was correct and there was remote possibility of achieving the numbers projected. But the renewal income figure which impressed the clients most was totally incorrect. Chuck is in a dilemma how to proceed further.

Characters in the case:

Chuck Campbell, Betty Mars, investors, a member of the management team are the characters mentioned in this case.

Adequate information:

Chuck is a newly recruited CEO of the startup. The investors had verbally committed to $16 million funding impressed by the renewal income.

To determine:

If Chuck should not inform about the incorrect numbers but when the company does not meet the numbers, provide an explanation to the investors as most high tech companies do.

Explanation of Solution

Given information:

Betty Mars back from leave informed that the numbers were exaggerated. Chuck reviewed to find the most of the numbers were statistically possible. However the renewal income is completely fake. A member of the management team present in the present had already know regarding the false numbers.

In my opinion, I do not think that it would be correct from Chuck's point to not speak out about the false numbers that he has used in the presentation. Trust is an important thing. When the investors get to know that they have been cheated with fake numbers, it leaves a bad mark both on the company and the CEO...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 6 Solutions

Management, Loose-Leaf Version
Show all chapter solutions
add

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
How does nonstore retailing occur?

Foundations of Business (MindTap Course List)

What is a compound entry?

College Accounting (Book Only): A Career Approach

Describe two errors that affect only a companys income statement.

Intermediate Accounting: Reporting And Analysis

How are managements actions incorporated in EVA and MVA? How are EVA and MVA interconnected?

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

PREPARE DEPOSIT TICKET Based on the following information, prepare a deposit ticket:

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

What is structured systems design?

Pkg Acc Infor Systems MS VISIO CD