Question: Thompson Technology, Inc., and Beaudoin Catering
Thompson Technology, Inc., and Beaudoin Catering Corporation are asking you to recommend their stock to your clients. Because Thompson and Beaudoin earn about the same net income and have similar financial positions, your decision depends on their statements of cash flows, which are summarized as follows
Requirement
1. Based on their cash flows, which company looks better? Give your reasons.
Ethical Issues
Georgetown Motors is having a bad year. Net income is only $37,000 to date. Also, two important overseas customers are falling behind on their payments to Georgetown, and Georgetown’s
accounts receivable are ballooning. The company desperately needs a loan. The Georgetown
board of directors is considering ways to put the best face on the company’s financial statements. Georgetown’s bank closely examines the company’s cash flow from operations. Donna McDowell, Georgetown’s controller, suggests reclassifying as long-term the receivables from the slow-paying clients. She explains to the board that removing the $80,000 rise in accounts receivable from current assets will increase net cash provided by operations. This approach may help Georgetown get the loan.
Requirements:
1. Using only the amounts given, calculate Georgetown’s net cash provided by operations,
both without and with the reclassification of the receivables. Which reporting makes the
company look better?
2. Identify the ethical issue(s).
3. Who are the stakeholders?
4. Analyze the issue from the (a) economic, (b) legal, and (c) ethical standpoints. What is the
potential impact on all stakeholders?
5. What should the board do?
6. Under what conditions would reclassifying the receivables be considered ethical?
> Describe the differences between entrepreneurial businesses and venture capital-backed firms.
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> Explain what is meant by the science and the art of starting and managing a business.
> Beyond some classic examples (Steve Jobs, Dlon Musk, Michael Cell, Larry Page, and Sergey Brin), name several entrepreneurs who have grown their businesses into major organizations.
> How do entrepreneurial businesses impact the economy?
> List some triggers that push people into starting a new business.
> How do you think personality differences matter in the starting of a business?
> How does bounded rationality affect the way an entrepreneur determines what type of business to start?
> Is there a minimum level of risk tolerance required to start a business? Explain.
> Why is founder involvement in a new venture so critical to its success?
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> What elements are in a competitive map?
> How does the lack of “slack” resources impact new ventures?
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> What are the questions a person should ask herself before she starts a franchise?
> What is the benefit of buying a franchise versus starting your own business? Are there any drawbacks?
> How do the franchisee and franchisor differ?
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