Disclosure of Estimates Nancy Tercek, the financial vice president, and Margaret Lilly, the controller, of Romine Manufacturing
Question:
Disclosure of Estimates Nancy Tercek, the financial vice president, and Margaret Lilly, the controller, of Romine Manufacturing Company are reviewing the financial ratios of the company for the years 2010 and 2011. The financial vice president notes that the profit margin on sales ratio has increased from 6% to 12%, a hefty gain for the 2-year period. Tercek is in the process of issuing a media release that emphasizes the efficiency of Romine Manufacturing in controlling cost. Margaret Lilly knows that the difference in ratios is due primarily to an earlier company decision to reduce the estimates of warranty and bad debt expense for 2011. The controller, not sure of her supervisor’s motives, hesitates to suggest to Tercek that the company’s improvement is unrelated to efficiency in controlling cost. To complicate matters, the media release is scheduled in a few days.
(a) What, if any, is the ethical dilemma in this situation?
(b) Should Lilly, the controller, remain silent? Give reasons.
(c) What stakeholders might be affected by Tercek’s media release?
StakeholdersA person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...
Step by Step Answer:
a The controller notes that the financial vice president is misrepresenting the financial condition ...View the full answer
Intermediate Accounting
ISBN: 978-0470423684
13th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
