Unclassified Week 1 E Activity Use The Internet To Locate Ex

Unclassifiedweek 1 E Activity Use The Internet To Locate Examples Of

Unclassified week 1 E Activity Use The Internet To Locate Examples Of UNCLASSIFIED Week 1 e-Activity · Use the Internet to locate examples of companies that have been guilty of ethics-based malfeasance related to financial management. Be prepared to discuss. "An Overview of Financial Management" Please respond to the following: · From the e-Activity, examine ethical behavior within firms in relation to financial management. Provide two (2) examples of companies that have been guilty of ethics-based malfeasance related to financial management and determine why their comeuppance was deserved. · Recommend two (2) actions that Trevose Fitness Center (TFC) could take in order to raise capital that will, in turn, enable it to reach its expansion goals. Defend your response. Support your recommendation with two (2) real-world examples of successful implementations of these actions. Week 2 e-Activity · Use the Internet to research instances when a company’s financial ratios did not align with those of other firms that operate within the same industry. Be prepared to discuss. "Analysis of Financial Statements" Please respond to the following: · From the e-Activity, determine why it is sometimes misleading to compare a company’s financial ratios with those of other firms that operate within the same industry. Support your response with one (1) example from your research. · * Determine two (2) strategies that TFC could utilize to reach its expansion goals. You may, for example, consider your analysis of TFC’s financial statements, as well as your knowledge of TFC’s excessive cash position. Provide a rationale for your response.

Paper For Above instruction

Introduction

Financial management plays a crucial role in the sustainability and growth of companies, but ethical conduct within this domain is equally vital. Unethical practices in financial management can lead to severe consequences, including legal sanctions, reputation damage, and overall financial instability. This paper examines examples of ethical malfeasance in corporate financial management, discusses strategies for a hypothetical business, Trevose Fitness Center (TFC), to raise capital, and explores the complexities of interpreting financial ratios relative to industry peers.

Ethics-Based Malfeasance in Corporate Financial Management

Two prominent examples of companies guilty of ethics-based financial malfeasance are Enron and WorldCom. Enron, once a leading energy company, engaged in accounting fraud by using off-balance-sheet entities to hide debt and inflate profits (Healy & Palepu, 2003). This deception misled investors and regulators about its true financial health, culminating in a catastrophic collapse in 2001. The company's malfeasance was deservedly punished with criminal charges against executives and significant reforms like the Sarbanes-Oxley Act, aimed at increasing corporate accountability.

Similarly, WorldCom, a telecommunications giant, committed one of the largest accounting scandals by inflating assets and profits through improper capitalization of expenses (Securities and Exchange Commission, 2003). The scandal's exposure resulted in a loss of investor confidence, severe financial penalties, and the imprisonment of top executives. These cases underscore how unethical behavior, driven by the desire for short-term gains, can cause extensive harm not only to stakeholders but also to the broader financial environment.

The comeuppance received by both companies was justified; their unethical practices eroded trust in financial reporting and harmed countless investors and employees. Such malfeasance highlights the importance of stringent regulatory oversight and corporate governance that emphasizes transparency and ethical conduct.

Raising Capital for Trevose Fitness Center (TFC)

To support TFC’s expansion, two viable actions are issuing equity through crowdfunding platforms and securing bank loans. Crowdfunding enables TFC to access a broad investor base, allowing capital infusion without diluting ownership excessively (Belleflamme, Lambert, & Schwienbacher, 2014). It provides a flexible way to raise funds while increasing brand visibility.

Secondly, obtaining bank loans can offer sizable capital injections with predictable repayment terms. By demonstrating strong cash flow projections and a solid business plan, TFC could secure favorable loan conditions. This approach relies on responsible debt management, ensuring that TFC can meet repayment schedules without jeopardizing its financial stability.

Successful examples include Pebble Technology’s successful crowdfunding campaign which raised over $10 million (Kalia, 2015), and fitness centers like Planet Fitness securing bank loans for larger facilities, leveraging their proven revenue streams (Bureau of Labor Statistics, 2020). These examples illustrate the effectiveness of diversified funding strategies in achieving expansion goals.

Industry Comparison of Financial Ratios and Its Limitations

Comparing a company’s financial ratios with industry peers can be misleading due to unique operational efficiencies and capital structures. For example, TFC’s excessive cash reserves, possibly meant for future investments, could distort liquidity ratios relative to competitors that operate with less cash on hand (Higgins, 2012). If TFC reports an unusually high current ratio, it might appear less risky than actual, but the excess cash might be underutilized or reserved for specific strategic purposes, not immediately available for operational needs.

This example illustrates that financial ratios should be interpreted contextually, considering each company’s specific financial policies and strategic objectives. Relying solely on ratios might lead to inaccurate assessments of relative performance and financial health.

Strategies for TFC’s Expansion

Two strategies TFC could adopt to reach its expansion targets include optimizing cash management and diversifying revenue streams. Improving cash flow management—by reducing unnecessary expenditures and optimizing receivables—can free up resources for reinvestment and debt reduction, thus enhancing operational capacity (Brigham & Ehrhardt, 2013).

Additionally, diversifying revenue streams might involve introducing new fitness programs or health services, thereby attracting a broader client base and reducing dependence on a single revenue source. This strategic diversification can stabilize income and fund further expansion while mitigating risks associated with market fluctuations.

Considering TFC’s large cash reserves, deploying these funds strategically in expansion initiatives makes sense, minimizing the need for external funding and reducing associated costs and risks.

Conclusion

Ethical conduct in financial management is essential for maintaining investor trust and market integrity. Cases like Enron and WorldCom serve as cautionary tales about the repercussions of malfeasance, underscoring the need for transparency and accountability. For TFC, employing diverse capital-raising methods and thoughtful financial strategies—such as optimizing cash and diversifying income—will be instrumental in achieving its expansion objectives. Moreover, understanding the limitations of financial ratio comparisons highlights the importance of contextual analysis in financial decision-making. Effective integration of ethics and sound financial strategies can pave the way for sustainable growth and long-term success.

References

  • Belleflamme, P., Lambert, T., & Schwienbacher, A. (2014). Crowdfunding: Torged crowdfunding platform. Journal of Business Venturing, 29(5), 585–609.
  • Bureau of Labor Statistics. (2020). Consumer expenditures—health and fitness centers. Retrieved from https://www.bls.gov
  • Healy, P. M., & Palepu, K. G. (2003). The fall of Enron. Journal of Economic Perspectives, 17(2), 3–26.
  • Higgins, R. C. (2012). Analysis for financial management (10th ed.). McGraw-Hill Irwin.
  • Kalia, P. (2015). Pebble Technology’s Kickstarter campaign: A case study. Harvard Business School Case 515-052.
  • Securities and Exchange Commission. (2003). SEC Charges WorldCom with Accounting Fraud. Retrieved from https://www.sec.gov
  • Healy, P. M., & Palepu, K. G. (2003). The fall of Enron. Journal of Economic Perspectives, 17(2), 3–26.
  • Bureau of Labor Statistics. (2020). Consumer expenditures—health and fitness centers. Retrieved from https://www.bls.gov
  • Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice (14th ed.). Cengage Learning.
  • Higgins, R. C. (2012). Analysis for financial management (10th ed.). McGraw-Hill Irwin.

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