However, due to the accounting measures used, by Q3 in 2000, the company managed to meet the Wall Street expectations. - Finally, WorldCom‟s stock price started to plummet, and the CEO faced margin calls from his bankers, forcing him to either sell his shares or repay the loans. He did not want to sell his shares as his doing so would put further downward
106 and 107 • WorldCom: 1, 3, 4, and 5 on p. 118 Enron 1. Which segment of its operations got Enron into difficulties? The ethical conflict of Kopper’s appointment to Fastow, while he was still employed by Enron, was one segment that caused Enron to get into difficulty. Another segment was that Enron booked revenue for services when those services had not been performed. Also, instead of paying stocks in cash, they were paid with promissory notes.
(Kadlec, 2002) If Enron's stock fell in value, the firm was obligated to issue more shares to the partnership to restore the value of the collateral underlying the debt or immediately repay the debt. Lenders in effect had direct recourse to Enron stock if at any time the partnerships could not repay their loans in full. Rather than limiting risk, Enron was assuming total risk by guaranteeing the loans with its stock. Discuss whether Enron’s officers acted within the scope of their authority. Enron also engaged in transactions that inflated its earnings, such as selling time on its broadband system to a partnership at inflated prices at a time when the demand for broadband was plummeting.
Occupy Wall Street Movement Assignment 1: Occupy Wall Street Movement The Occupy Wall Street movement initially began on September 17, 2011. This movement began as a demonstration “against the influence of corporate money in politics, but participants also say they are upset about what they see as corporate greed, and, financial and social inequality.” (Haidt, 2012) One of the largest moral implications of the movement was that in terms of democracy. Most people know that the democracy and rights are controlled largely by money, not the people within said democracy. People who participated in the OWS movement knew if there was to be any change in the way the con try is controlled, and ran, then we need to stop looking at the dollars
3.3 – United Way 1. There are several fundamental and cost-effective internal controls that would have saved these charities millions of dollars. The first being primarily that executives within these organizations should not have total control over their respective financial functions. Several of these fraudsters had complete control in that they would receive the donation checks, authorize them by endorsing them, and then also having control over the financial records necessary to account, or not, for the donations. A simple control would have been a separation of duties such as someone who receives the checks should not have the function of also recording these entries in subsidiary or general ledgers.
By buying on margin, the investor had to pay a fraction of the quoted price of any particular security. The additional money needed to cover the purchase was supplied by the broker, who obtained these funds from a bank with which he had deposited his customer’s stock as a collateral” (Doc G). While people thought of this as a good idea at the time, buying on a margin really caused more damage than good once the stock market began to crash. So rather than earning money, they were losing more money than they put in, which inevitably caused problems because they could not successfully pay the bank all the money that they owed. However, as bad as that may seem, being in debt was
This would therefore give them a competitive advantage as other banks preferred taking help from the government. Throughout the years, at times, the executive management and Board of Barclays felt under restriction, not only from the unstable markets but also from its stakeholders, such as the government. Barclays first raised an additional £4.5 billion of capital in July 2008, then Barclays committed to obtain additional funds from private investors, and to sell some of its subsidiaries for $13.5 billion. This would have helped the Bank from being influenced by the government and to reduce the amount of complaints from employees and shareholders as influences from different stakeholders would cause conflicts during decision making. However, the crisis did bring a unique opportunity to Barclays.
This company clearly did not follow the Generally Accepted Accounting Principles put in place by the Securities and Exchange Commission or SEC. Fannie Mae has been investigated and fined for these unethical behaviors but never admitted and guilt. Unethical Behavior The unethical behavior Fannie Mae acted in was a clear falsification of the financial statements so the CEOs could receive bonuses and make investors thinks the business was doing better than it actually was, according to the Securities and Exchange Commission it was a blatant “cooking of the books.” This resulted in a $400 civil penalty, a $727 billion cap on the mortgage holdings by the company, and a $350 million fine assed by the SEC ("Nbcnews.com," 2012). The company also had to reset its income back to the 2001 amount as part of the penalty ("Nbcnews.com," 2012). Fannie Mae did not have to admit any wrong-doing in the acceptance of these penalties.
Kurtzman says margin buying is a risky technique involving the purchase of securities with borrowed money and using the shares themselves as collateral (81). This was usually done by using a margin account at a brokerage. During the 1920’s some people had not paid cash for their stocks, but rather bought stock with credit. These people had expected their stocks to become more valuable and planned to pay off their debts to the stockbrokers with the extra money they earned. They would be making money as long as their stock price increased, but if the prices fell then they would be deep in debt (Taranto, The NYSE Crash of 1929).
Issues in Accounting Education Vol. 17, No. 4 November 2002 Earnings Quality Assessment by a Sell-Side Financial Analyst Bart Kamp ABSTRACT: The paper presents an instructional case on earnings quality. The case is based on a real-life financial analyst’s report on the acquisition of the U.S. publisher CCH by the Dutch publisher Wolters Kluwer. Although the analyst believed that CCH was a sound investment, he downgraded his buy recommendation on Wolters Kluwer because of the deterioration of earnings quality, caused by a seemingly unusual accounting method for restructuring costs following the acquisition.