Because the company must produce all financial information to the SEC many businesses find it to be very stressful and time consuming which takes time and money away from a company that is thriving like Kudler Fine Foods. Legal liability is important when conducting an IPO and those offering the shares can be personally sued. The expenses continue after the company goes public with the SEC reporting requirements. Kathy Kudler will not only lose control of some of the decision making for Kudler Fine Foods with an IPO, but she will also lose some of the profits, as a portion will go to the
Overstating projections A problem that can arise from starting the budget is when the person who created the budget gets an idea that the business will sell more items than the business is realistically able to do. If this happens the business will spend a lot of money on items that the budget believe the business will sell but in reality the business will not be able to sell this stock. IF the business is in the food industry and this problem happens it will end up going to waste as food goes off. This will result in the business losing a lot of money which they could spend elsewhere and if the business doesn’t have much money this money could have been used to pay off their expenses. If the business does lose this money they might
Fewer companies are willing to enter the market because of the SOX requirements that make going public too costly. Plus, the maintenance required to stay public is too expensive for smaller companies, forcing companies to look elsewhere to raise capital. Rising costs persuade large numbers of companies to exit the public markets to sidestep SEC regulation, creates two problems. First, the overall economy could suffer because corporations limit investment projects due to the higher-cost sources of capital to fund potentially new operations. Second, financially stressed companies that go dark are the very companies’ shareholders need to monitor usually and where transparency is most important.
2. What might go wrong in the future? The Internal Venture concept requires a lot of capital funding from Telecam so, if this concept has been promoted but most venture funded turn to be failure, the financial standing could be in trouble. Secondly, when several internal ventures have been set up there is a chance that the company could turn to fragment organization. Thirdly, the stock option which intend to provide tremendous potential return to the founder of each Internal Venture, however, if the stock price of Telecam tumble down, the stock option will no longer an effective incentive to the founder member.
The expenses scare a lot of able candidates away from the profession, able candidates from poorer families either take up a loan or they choose another profession. If they choose to take up a loan, they will find themselves in debt even before they have begun working as solicitors. The danger here is that the profession will be dominated by (some argue it already is) elitists, people from wealthy families that can pay everything for them. This tendency is dangerous because the profession will not reflect diversity if all the would-be solicitors are elitists (middle-class/rich, exclusive and so on). However some small measures have been taken, the LPC can be taken over two years, and then the would-be solicitors would be able to take a job and do the course at the same time.
When corruption occurs it damages the reputation of the employees and the business. Society relied upon this firm to assist in making them money but the firm was more concerned with their bottom line. Many of the individuals doing business with these firms lost their life savings and destroyed some of the trust that investors have with the Wall Street firms. It makes people have second thoughts about investing in the stock market. Another effect this unethical behavior had on these organizations been they agreed to pay a penalty of over $1.43 billion dollars as compensation to the victims.
“Ponemon Research puts the cost of compliance at $3.5 million for the 46 businesses they studied.” (ShredNation, 2012) As the quote states, adhering to compliance including implementing external and internal auditors is expensive. Although the costs may be high, non-compliance can be just as costly in a negative way to the organization. Non-compliance can cause loss of positive reputation, loss of investors and shareholders, loss of customers, decreases in stock prices, lack of revenue, state and federal regulation fines, corporate scandals, financial bailouts, and last failure and closure of the organization. These risks are all costly to an organization and can cause ultimate failure. Adhering to compliance is crucial to prevent companies from failing and taking huge financial loses.
The weaknesses that Kudler may face would be the financial burden of going public. Sometimes expenses pile up just from seeking help from outsiders to protect the investments. The economy has fluctuated over the years; therefore the company needs to ensure they have contingency plans in place when business may not be as stable. There are ample opportunities that can come about from selecting an IPO. A company's debt-to-equity ratio will usually improve after going public, which tends to result in more favorable financing arrangements (2014, Going Public, para 1).
For example Owner’s drawing was one of the main areas which bring a loss to the business, because the owner took money out of it every month, instead of investing or spend that amount of money in other areas in the business. Furniture was another issue which cause a negative balance for the business, as they spend a lot of money in one go, instead of going for a higher purchase or other financial plan which allows them to pay the furniture in
It is also very expensive to take this approach. Marketing and going public with your corporation cost a lot with fees that include legal, accounting, underwriting, commission, filings, and marketing fees. Acquiring another organization in the same industry has it's weakness's as well. It can use up a lot of the companies cash funds to start up another organization. More debt will be created at first and possibly in the future depending on how good the new company takes off.