Builtrite preferred stock is currently selling at $64. The stock currently pays 4% dividend based on a par value of $60. If you purchase the stock, what is your expected return? 3.5% 4.25% 3.75% 4.0%
Answers
Option (c), the expected return for Builtrite preferred stock is 3.75%
Given,
The Builtrite preferred stock is currently selling at $64. The stock currently pays 4% dividend based on a par value of $60.We need to calculate the expected return.
The formula for calculating the expected return is:
Expected Return = (Dividend / Price) + Growth rate
Dividend = Par Value * Dividend Rate
Dividend = 60 * 4% = $2.40
Price = $64
Dividend / Price = $2.40 / $64 = 0.0375 or 3.75%
Since no growth rate is given, we assume it to be 0.
Using the formula above, we can calculate the expected return as follows:
Expected Return = (Dividend / Price) + Growth rate
Expected Return = 3.75% + 0Expected Return = 3.75%
Therefore, the expected return for Builtrite preferred stock is 3.75%.
Expected return = (Annual Dividend / Market Price) * 100
Expected return = ($60 × 4%) / $64 = $2.4/$64 = 0.0375 or 3.75%
Expected return = (0.0375) × 100 = 3.75%
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Related Questions
What is the difference between a bank and a retail bank?
Answers
The main difference between a bank and a retail bank is the type of customer they serve.
A bank is a financial institution that offers a variety of services, such as loan and deposit products, investment services, and financial advice. A retail bank is a type of bank that specializes in consumer banking, typically offering services such as savings and checking accounts, loan and credit products, debit cards, and other consumer-focused products and services.
A bank typically serves both retail and commercial customers, whereas a retail bank focuses exclusively on consumer banking. This means that retail banks tend to offer products and services that are tailored to meet the needs of individual consumers.
Additionally, retail banks are typically smaller in size than banks and have fewer branches, making them more accessible to consumers. They also tend to have shorter wait times and more personalized customer service, which can be beneficial for those who need more time and attention when it comes to their banking needs.
Overall, a bank and a retail bank both provide financial services, but they serve different customer types and offer different products and services. Banks focus on commercial customers, while retail banks focus on consumer banking.
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all along the supply chain, distribution channels add value to the product by
Answers
Answer: All along the supply chain, distribution channels add value to the product: They make it available to ship to the next step in the supply chain, take customer orders, and ship the product to the next step in the chain.
The flow of products passes through intermediaries like wholesalers, distributors, and retailers, which are known as distribution channels or marketing channels.
Distribution channels offer value to the product at every step of the supply chain: they make it ready to ship to the next step in the chain, receive client Orders are placed, and the goods are shipped to the next step in the process.
About supply chain, distribution channels:
The operations required by the organization to deliver goods or services to the consumer are referred to as a supply chain Within our company. A supply chain is a focus on the primary operations required to turn raw materials or component parts into finished products or services.
A distribution channel is a network of firms or intermediaries that a product or service passes through before reaching the final customer or end user.
Wholesalers, merchants, distributors, and even the web are all potential outlets for distribution.
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Define the term "minimum acceptable rate of return" (MARR) (2)
3.2 For Mashinini Enterprises, the current MARR is set at 11%. Would the MARR be adjusted upwards or downwards for the following scenarios:
(a) An increase in the company tax rate, set by the South African Renenue Service. (2)
(b) The perceived risk on a project is high (2)
(c) There are a large number of projects to choose form (2)
Motivate your answer for each of the scenarios.
Answers
The minimum acceptable rate of return (MARR) is the minimum rate of return or discount rate that an investor or company requires in order to undertake an investment or project.
It represents the minimum rate at which the expected benefits of an investment should exceed the costs or risks associated with it. An increase in the company tax rate set by the South African Revenue Service: The MARR would be adjusted upwards. When the tax rate increases, it directly affects the cash flows generated by the investment. require a higher rate of return to compensate for the additional risk. By increasing the MARR, the investor is demanding a greater return to offset downwards. In a situation where there are many investment opportunities available, investors may lower their MARR to consider a potential investments to meet the required rate of return, thereby increasing the chances of finding suitable projects to undertake. Overall, the adjustments to the MARR depend on the specific circumstances of the investment, such as changes in tax rates, perceived risk levels, or the availability of alternative projects, and are intended to align the expected returns with the associated risks and opportunities.
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A type of securities distribution in which the issuing corporation is assured of receiving the full amount of the offering and anything unsold is retained by the underwriter is a(n):
Answers
A type of securities distribution in which the issuing corporation is assured of receiving the full amount of the offering and anything unsold is retained by the underwriter is a(n) firm commitment underwriting.
Underwriting is the method of financing where an investment banker or underwriter buys a block of shares from an issuing company. The investment banker underwrites the deal by agreeing to buy the entire block of shares from the issuing company and then attempting to sell them to investors. Any unsold shares remain with the investment banker at the end of the offering period.
A firm commitment underwriting is a type of securities distribution in which the issuing corporation is assured of receiving the full amount of the offering and anything unsold is retained by the underwriter. It means that an investment bank or a group of investment banks will acquire all of the shares being offered for sale by the company and then resell them to the public.
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If a certain organism is a primary consumer, what best explains its position in the food web?.
Answers
A. X, since creature X performs the same function as a grasshopper. The creature is identified in the food chain by the letter X and performs the same function as the grasshopper.
The majority of primary consumers are herbivores. They consume plant material directly and transform it into nutritious food for themselves.
Grass is what grasshoppers eat.They have the ability to transform plant stuff into ingestible meals.
These kinds of organisms are the main consumers.
Y-type organisms are examples of secondary consumers.
What does a food web's principal customer look like?The second trophic level consists of primary consumers. Herbivores is another name for them. Only primary producers like plants or algae are eaten by them. A primary example of an organism existing in the Everglades is a grasshopper.
Question: If a certain organism is a primary consumer, what best explains its position in the food web? (See picture above)
A. X, because organism X has the same role as the grasshopper
B. y, because organism Y has the same role as grasshopper
C. x, because organism X has the same role as the baby sparrow
D. Y, because organism Y has the same role as the baby sparrow
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What is a key aspect of the global economy that works against you when trying to save and invest?
Answers
Answer: Instability in currencies and crude oil
Explanation:
Investing and saving takes a toll on individuals when there in an unstable economy, they may have some property or money and in some moment it losses value. The following are global key aspect of the economy that can affect investment and saving;
-Instability of currencies; for someone whose local currency is far lower than dollars(the general trading currency), they would find it hard to invest most especially if the country imports most of what they use. They could get an item for a particular price in January and in the next week's, their local currency falls, they may not be able to afford that same item they got.
- Crude oil price; due to a large percentage of the world uses crude oil, it's rise and fall in prices affects a lot of people and their investment
If the price of a product is $20, marginal analysis says which of the following
must be true in order for a consumer to purchase the product?
Answers
Answer:
MB exceeds $20
Explanation:
Which of the following statements is correct?
A. Cost recovery for the declining balance (DB) method is smaller in earlier years than cost recovery for the straight-line (SL) method.
B. If more than 40% of personality are placed in service during the 4th quarter of the year, taxpayer
uses the mid-year convention.
C. According to the half-year convention, an asset sold on January 13th will be assumed to be sold in
the middle of the year.
D. Cost recovery starts on the date an asset is purchased.
E. A business taxpayer must use the double declining (DB) method when the property being depreciated is a rental property.
Answers
"If more than 40% of personality are placed in service during the 4th quarter of the year, taxpayer uses the mid-year convention.Convention, in the aspect of the depreciation of assets, refers to the method used to determine the depreciation of a property over its useful life.
The correct statement is B.
The convention used decides how much of the asset's cost is to be written off in the first year it is placed in service and in the last year it is used for revenue generation.The mid-year convention is a method used in the United States tax law to calculate depreciation. This convention specifies that assets placed in service in any given tax year are assumed to have been put in use exactly halfway through that year. This means that if an asset is placed into service in May,
it is assumed to have been placed into service on June 30th for tax purposes.The correct statement is "If more than 40% of personality are placed in service during the 4th quarter of the year, the taxpayer uses the mid-year convention." This means that if an individual places more than 40% of their personal property into service during the last quarter of the year, then they have to use the mid-year convention to calculate depreciation.
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Complete a departmental expense allocation spreadsheet for Marathon Running Shop. The spreadsheet should assign (1) direct expenses to each of the four departments, (2) the $64,000 of utilities expense to the four departments on the basis of floor space occupied, (3) the advertising department’s expenses to the two operating departments on the basis of the number of ads placed that promoted a department’s products, and (4) the administrative department’s expenses to the two operating departments based on the amount of sales.
Answers
Question Completion:
Marathon Running Shop has two service departments (advertising and administrative) and two operating departments (shoes and clothing). The table that follows shows the direct expenses incurred and square footage occupied by all four departments, as well as total sales for the two operating departments for the year 2017
Direct Expenses Square Feet Sales
Department
Advertising $ 18,000 1,120
Administrative 25,000 1,400
Shoes 103,000 7,140 $273,000
Clothing 15,000 4,340 77,000
The advertising department developed and distributed 120 advertisements during the year. Of these, 90 promoted shoes and 30 promoted clothing. Utilities expense of $64,000 is an indirect expense to all departments.
Answer:
Marathon Running Shop
Allocation of service departments' costs to the operating departments:
Service Departments Operating Departments Total
Advertising Administrative Shoes Clothing
Departmental $18,000 $25,000 $103,000 $15,000 $161,000
Utilities 5,120 6,400 32,640 19,840 64,000
After Utilities 23,120 31,400 135,640 34,840 $225,000
Advertising -23,120 17,340 5,780 0
Administrative -31,400 24,492 6,908 0
Total allocated costs $177,472 $47,528 $225,000
Explanation:
a) Data and Calculations:
Direct Expenses Square Feet Sales
Department
Advertising $ 18,000 1,120
Administrative 25,000 1,400
Shoes 103,000 7,140 $273,000
Clothing 15,000 4,340 77,000
Total $161,000 14,000 $350,000
Allocation of Utilities Expense of $64,000
Rate
Advertising (1,120/14,000 * $64,000) = $5,120
Administrative (1,400/14,000 * $64,000) = $6,400
Shoes (7,140/14,000 * $64,000) = $32,640
Clothing (4,340/14,000 * $64,000) = $19,840
Advertising $ 18,000 + $5,120 = $23,120
Administrative 25,000 + $6,400 = $31,400
Shoes 103,000 + $32,640 = $135,640
Clothing 15,000 + $19,840 = $34,840
Advertising expenses consumed by:
Shoes 90/120 * $23,120 = $17,340
Clothing 30/120 * $23,120 = $5,780
Administrative expenses consumed by:
Shoes $273,000/$350,000 * $31,400 = $24,492
Clothing $77,000/$350,000 * $31,400 = $6,908
Clarity the similarities and differences
between plough and tractor.
Answers
Answer:
Explanation:
1. Plough is a local technology whereas Tractor is a modern technology.
2. Plough requires human energy whereas Tractor does not require much human energy.
3. Plough doesn’t affect the environment whereas Tractor affects the environment.
4. Lever technology is used in Plough whereas Rolling technology is used in Tractor.
5. Plough requires or consumes more time whereas Tractor consumes less time.
Hope this helped!!!
||PERSONAL FINANCE||
Why would someone choose to have extra money withheld from his paycheck for federal taxes? (1 point)
OA person lives in a state with high income taxes and wants to make sure enough taxes are withheld.
O This person considers himself a patriot and wants to pay more taxes.
O This person chose an insurance plan with a high deductible.
O This person did not want to risk having too little money withheld and facing a penalty when filing their tax return.
Answers
The reason why someone would choose to have extra money withheld from their paycheck for federal taxes is: D. This person did not want to risk having too little money withheld and facing a penalty when filing their tax return.
Why would someone choose to have extra money withheld from his paycheck for federal taxes?By having extra money withheld from their paycheck, the person ensures that they will have enough taxes paid throughout the year to avoid owing money or facing penalties when they file their tax return.
This approach is often used by people who have experienced owing money in previous years or those who want to avoid the hassle of having to pay a lump sum at tax time.
Therefore the correct option is D.
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Answer:
this person did not want to risk having too little money withheld and facing a penalty when filing their tax return.
Explanation:
connexus
Linda Baer has already saved $6,500 to buy a used vehicle. Ignoring taxes and assuming her money is invested in a money market account earning 3 percent compounded annually, how long will it take to buy a car that costs $9,000?
Answers
Answer:
11 years.
Explanation:
Below is the calculation for the time period:
Present value of the money = $6500
Interest rate = 3%
Future value of the money = $9000
Future value = Present Value (1 + r )^n
9000 = 6500 (1 + 3%)^n
9000/6500 = (1 + 3%)^n
1.3846 = (1.03)^n
Now solve for the value of n by taking ln on both sides.
Thus n = 11 years.
The US Supreme Court did what in Piscataway Board of Education v. Taxman, 521 U.S. 1117, 117 S.Ct. 2506 (1997)?
Answers
Answer:
The case was never heard in the United States Supreme Court.
Explanation:
The board of education of Piscataway High School, New Jersey desired to remove one teaching position from the Business Education department. A hindrance to this was the fact that the two teachers being considered had indefinite appointments, and were equal in seniority. According to the state law, tenured teachers can be relieved of their duties in reverse order of seniority. Either Sharon Taxman, a white teacher, or Debra Williams an African-American teacher were to be relieved of their positions.
Taxman was chosen because African-Americans were a minority. Taxman contested this in the court. The case was never heard at the U.S Supreme court because some civil rights group wanted the case to be settled out of court. The United States Court of Appeal ruled in favor of Taxman.
The economy of the United States is BEST described as
A. noncompetitive
B. socialistic
C. government-owned
D. market-based
E. not-for-profit
Answers
B. Socialistic
Answer:
i believe the answer is b
Explanation:
because the us economy is best described as mixed ( capitalism & socialism) so i think its b
What impact will higher wages have on the labor force participation of women? 
Answers
Young black women with college degrees had the highest lifetime incomes but lower labor force participation rates.
In comparison to men, women have fewer opportunities to make money globally. Women are less likely to actively search for work or do paid labor. Compared to 80% of men, only slightly more than 50% of women in the world work. People's labor force involvement varies depending on demographic parameters such sex, birth year, education, marital status, and the presence of young children at home. Low female labor force participation in India is a complex socioeconomic phenomenon caused by factors like rural-urban migration, patriarchal attitudes, and an imbalance in supply and demand. Wages Increase for Men and Women When More Women Work. based on data from 250 U.S. cities over 30 years. The greatest major economic shift during the previous century was probably the rise of women in the paid employment.
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apple music signed a five-year, $50 million-per-year deal to sponsor the super bowl halftime show. which previous halftime sponsor held the rights the longest?
Answers
A 30-second commercial during the Super Bowl the following year is expected to cost around $7 million. Apple, for one, determined that this was too expensive. The entire halftime show was thus purchased.
According to Brian McCarthy, the NFL's vice president of communications, the expensive does not pay halftime performers a "appearance fee, but the artists are indeed paid union scale." Each light, fireworks, or special effect can raise the overall cost by thousands of commercial. Sometimes the total comes to millions of dollars. For instance, Esquire claims that it cost $13 million to stage Jennifer Lopez and Shakira's 2020 concert.
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sports corporation has 11.9 million shares of common stock outstanding, 6.9 million shares of preferred stock outstanding, and 2.9 million bonds. if the common shares are selling for $26.9 per share, the preferred share are selling for $14.4 per share, and the bonds are selling for 96.81 percent of par, what would be the weight used for common stock in the computation of sports's wacc?
Answers
The weight used for common stock in the computation of Sports Corporation's WACC is 0.7581.
To calculate the weight of common stock in the computation of the weighted average cost of capital (WACC),
Determine the proportion of total capital that is represented by common stock.
The weight of common stock
= market value of common stock / total market value of all capital components (common stock, preferred stock, and bonds).
First, calculate the market value of common stock,
Market Value of Common Stock
= Number of Common Shares Outstanding × Price per Share
= 11.9 million shares × $26.9 per share
=320.11
Next, calculate the market value of preferred stock,
Market Value of Preferred Stock
= Number of Preferred Shares Outstanding × Price per Share
= 6.9 million shares × $14.4 per share
=99.36
Lastly, calculate the market value of bonds,
Market Value of Bonds
= Number of Bonds Outstanding × Selling Price per Bond
= 2.9 million bonds × 96.81% of par value
=2.8049
Now, calculate the total market value of all capital components,
Total Market Value
= Market Value of Common Stock + Market Value of Preferred Stock + Market Value of Bonds
=320.11 + 99.36 + 2.8049
=422.2749
Weight of Common Stock
= Market Value of Common Stock / Total Market Value
=320.11 / 422.2749
=0.7581
Therefore, the weight of common stock used in the computation of Sports Corporation's WACC is equal to 0.7581.
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When an issuer wishes to conduct a shareholder vote as part of the annual meeting, the proxies are sent to beneficial owners holding shares in street name by (the) A. shareholder relations department of the issuer B.obroker-dealer holding the shares C.ODTCC D. transfer agent
Answers
The proxies are sent to beneficial owners holding shares in street name by the broker-dealer holding the shares. The correct answer is B.
When shares are held in street name, the actual shareholder's name is not registered with the company but rather with the broker-dealer through which the shares were purchased. In this case, the broker-dealer is responsible for distributing proxies to the beneficial owners and collecting their votes.
The issuer (company) sends the proxies to the broker-dealer, who then sends them to the beneficial owners. The broker-dealer may also provide voting instructions or assistance to the beneficial owners.
The transfer agent, on the other hand, maintains the official record of shareholders for the company and may assist in the voting process, but they are not responsible for distributing proxies to beneficial owners holding shares in street name. Thus, the correct option is B.
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5. Now create your production possibilities curve, based on the information in the table you just filled out. Use the chart shown as a model, but note that your numbers and your curve will be different. Depending on the numbers you wrote in your table, your "curve" may even look more like a slant. (2 points)
Answers
Two units—blankets and socks—are depicted in the production possibilities curve model. However, in relation to another illustration, coffee and sugar.
What is production possibilities curve?
A production possibility curve essentially depicts two items graphically. The "production possibility frontier" is another name for PPC.
Underutilization of resources and technology is demonstrated by the production possibilities curve model. One unit is added while another is sacrificed on the production possibilities curve. Levels are displayed at various places.
The PPC is a useful tool for demonstrating the ideas of scarcity, opportunity cost, efficiency, and economic development and contraction. The downward slope of the concave shaped.
As a result, production possibility curve model is two different commodities such as sugar and coffee.
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marissa purchases $500 of stock directly from a corporation without having to use an account executive or a brokerage firm. she is using a
Answers
Marissa purchases $500 of stock directly from a corporation without having to use an account executive or a brokerage firm. She is using a Direct reinvestment plan.
What is a dividend reinvestment plan?A Dividend Reinvestment Plan or DRIP is a program that allows shareholders to automatically reinvest their cash dividends into additional company shares. The company will set a limit on how many shares the investor can purchase in one transaction. For example, up to 100 shares with each DRIP purchase.
Some companies also offer cashless Dividend Reinvestment Plans that allow investors to automatically reinvest their dividends without purchasing stock.
Investors that choose this type of plan must use dividend-paying stocks like preferred stocks, common stocks, and money market funds.
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Which statement is true about the Freedom of Information Act?
A. Requests for information can be made either in writing or orally.
B. It is designed to keep the public in the know about their
government.
C. It allows the public to request all government information.
O D. Citizens cannot be charged money to request information.
SUBMIT
Help please
Answers
The statement which is true about the Freedom of Information Act is:
C. It allows the public to request all government information.What is Freedom of Information Act?This refers to the piece of legislation which was passed in America to ensure that access to information is available to the public and hold their leaders accountable.
With this in mind, we can see that by allowing the citizens to request for government information is important to ensure that they hold their leaders accountable for their actions and deeds.
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Answer: b it is designed to keep the public in the know about their government
Explanation:
help me to answer thi Q! Thanks!
Answers
How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%?a. $438.03b. $461.08c. $485.35d. $510.89e. $537.78
Answers
Answer:
The present value is $537.78
Explanation:
Given
\(Future\ Value\ (FV) = \$20,000\\Time (T) = 50\ Years\\Discount\ Rate\ (R)= 7.5\%\)
Required
The Present Value(I)
To calculate the present value, we simply apply the formula for future value;
\(FV = I *(1 + R)^T\)
Substitute 20,000 for FV; 50 for T and 7.5% for R;
This gives
\(20,000 = I *(1 + 7.5\%)^{50}\)
Convert percent to decimal
\(20,000 = I *(1 + 0.075)^{50}\)
\(20,000 = I *(1.075)^{50}\)
\(20,000 = I *37.19\)
Divide both sides by 37.19
\(\frac{20,000}{37.19} = \frac{I *37.19}{37.19}\)
\(\frac{20,000}{37.19} = I\)
\(537.778 = I\)
\(I = 547.78\ (Approximated)\)
Hence, the present value is $537.78
What is an advantage of small business loans through the sba?
Answers
Answer:
There are several advantages to obtaining a small business loan through the Small Business Administration (SBA):
1. Lower interest rates: SBA loans typically have lower interest rates than traditional business loans, which can save a business owner a significant amount of money over the life of the loan.
2. Longer repayment terms: SBA loans often have longer repayment terms than traditional business loans, which can make monthly payments more manageable for small businesses with limited cash flow.
3. Lower down payments: SBA loans often require lower down payments than traditional business loans, which can help small businesses conserve their cash reserves.
4. Access to capital: SBA loans provide small businesses with access to capital that they may not be able to obtain through traditional lending sources, especially if they have a limited credit history or lack collateral.
5. Business support services: The SBA offers a variety of business support services, including counseling, training, and technical assistance, to help small businesses succeed.
why is it important to study marketing?
Answers
Answer:
Is this the answer. It may can help you
please answer all questions and not only half :)
Mary's job position is being transferred to Lexington, Kentucky from Orlando. Florida. She and her husband George are currently renting their home in Orfando, beat they have decided that they want to
Answers
Mary and George have decided to sell their home in Orlando, Florida, as Mary's job position is being transferred to Lexington, Kentucky.
Selling their home in Orlando is a practical decision considering Mary's job transfer to Lexington, Kentucky. By selling their current home, they can avoid the challenges of managing a rental property from a long distance and potentially facing issues with tenants, maintenance, and property management. Selling the home would also free up their financial resources tied to the property and provide them with a lump sum of money that they can utilize for various purposes, such as purchasing a new home in Lexington or investing in other ventures. Furthermore, selling their home in Orlando may provide them with the opportunity to capitalize on any potential appreciation in the property's value. Real estate markets can fluctuate, and by selling at the right time, they may be able to secure a higher selling price, resulting in a financial gain. Additionally, if they have paid off a significant portion of their mortgage, selling the home would allow them to receive the equity accumulated over time, providing them with additional funds for their future plans. In conclusion, selling their home in Orlando is a logical decision for Mary and George, given Mary's job transfer and the potential benefits it offers, such as avoiding the challenges of long-distance property management and potentially capitalizing on the property's value appreciation.
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Clemson University Urgently needed $30 million to properly execute a student testing plan during fall of 2020. Clemson approached by a commercial paper dealer offering to sell an issue for Clemson. The dealer indicates that Clemson could sell a $30 million issue maturing in 270 days at an interest rate of 8. 5 percent per annum (deducted in advance). The fee to the dealer for selling the issue would be 1. 5% of the issue size. What was annual financing cost of Clemson to secure large-scale testing
Answers
The financing cost of Clemson to secure the investment will be $2.2875 million.
How to calculate the financing costFrom the information, we've to calculate the simple interest first. This will be:
= PRT/100
= (30 × 0.75 × 8.5)/100
= 1.9125 million
The fee is 1.25% of the issue size. This will be:
= 1.25% × $30 million
= $375000
Therefore, the financing cost will be:
= $1.9125 million + $0.375 million
= $2.2875 million
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critically discuss how career and study choices are influenced by the following socio-economic factor: availability of finances/affordability
Answers
Answer:
availability of financial/affordability
Explanation:
it's enables you to make more money for the growth of the community so we study it that way
Cast Away Electronics paid a sum of $25,000 to an official of a foreign government to ensure that the company obtained exclusive preferential treatment for the plant it is building. The $25,000 can be classified as:____________
Answers
The payment by Cast Away Electronics to an official of a foreign government can be classified as a bribe.
Why is it a bribe?A bribe is a payment made by an entity to another entity in order to gain an unfair advantage or favor.
Cast Away Electronics wanted to gain an unfair advantage in the treatment of a plant and so paid a government official. This is therefore a bribe.
In conclusion, this is a bribe.
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OLYMPUS CORPORATION CASE STUDY
Options:
What options did Woodford have after learning about the potential fraud? What would you have done if you were in his shoes? You can discuss internal and external options that he had.
Do you think he should have done nothing after learning about the fraud? What would have been the implication of this decision?
Recommendations:
What are the accounting implications of the fraudulent transactions and what is your recommendation in terms of how this could be prevented?
What changes in corporate governance would you recommend for Olympus?
How did the Japanese corporate governance impact the development in Olympus? What are your recommendations for improvement?
Answers
After learning about the potential fraudulent transactions, Michael Woodford, the CEO of Olympus Corporation had the following options; he could: Launch an investigation into the allegations. Resign and leave the firm. Report the issue to the media or the police. Lawyer up and sue the company for breach of contract or other laws. Woodford did the first option of launching an investigation into the allegations. He informed the chairman of the board about the findings of the investigation. This led to the dismissal of four senior executives and other officers that were involved in the fraudulent activities. If I were in his shoes, I would have also launched an investigation into the allegations.
Internal and external options that Woodford had include:
Internal options: Woodford could have sought to confront the individuals directly involved in the fraud. Woodford could have decided to take the case to the board of directors before involving the media or the police.
External options: Woodford could have chosen to inform the media about the fraud and provided evidence that he had. This could have led to media coverage that would lead to public pressure on the board of directors to take action against those involved in the fraud.
Woodford could have gone to the police and informed them of the fraud so that they could launch an investigation.
Accounting implications of the fraudulent transactions and prevention recommendationsThe fraudulent transactions had significant accounting implications. The implications included overstating financial statements, manipulating tax payments, and manipulating acquisition costs. As such, some of the recommendations to prevent fraudulent activities include:
Implementing stringent internal controls and segregation of duties in the company's accounting department.
Limiting the involvement of employees in the financial accounting of the firm.Conducting regular audits on the company's financial statements.
Changes in corporate governance recommended for Olympus. Some of the changes in corporate governance recommended for Olympus include:
Implementing a transparent process of governance where the roles and responsibilities of all board members and top executives are clearly defined.Implementing stringent controls and practices to eliminate fraudulent activities.Ensuring that there is a sound risk management framework that is used to identify and mitigate risks at all levels of the company.
Japanese corporate governance impact on development in OlympusThe Japanese corporate governance impacted the development in Olympus. There were several issues with the governance framework, including the lack of independent directors, high director compensation, cross-shareholdings, and complex cross-shareholding relationships. These factors made it easy for fraudulent activities to go undetected. To improve governance in the future, the company should consider hiring independent directors and implementing a sound corporate governance framework that focuses on transparency, accountability, and integrity.
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