Buff Tech, Inc. sells computer components and plans to borrow some money to expand. The company has a 12/31 year-end. After reading about earnings management (refer back to Chapter 4), Bucky, the owner has decided he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases and take delivery of the goods by December 31. He told the customers he would allow them until the end of February to pay for the purchases, just as if they had made the purchases in January.

Note: For revenue recognition purposes, the performance obligation was satisfied by 12/31.

Question:

What are the ethical implications of this plan? What ratios will be improved by accelerating these sales? What about future implications?

16 Problem Set 1: Direct Finance or Indirect Finance? a. _You purchased a firm's shares from its initial public offering last year. (2 25) Direct Finance Indirect Finance 17 Problem Set 1: Direct Finance or Indirect Finance? b. People buy shares in a mutual fund. (2 45 ) Direct Finance Indirect Financecomments & Changes On Paus Observation Salary Position Experience $ 53,938.00 Finance 2 to 5 years 2 $ 52,694.00 Finance 2 to 5 years 3 $ 70,515.00 Non-Finance Less than 2 years $ 52,031.00 Finance 2 to 5 years $ 62,283.00 Non-Finance Less than 2 years 5 $ 57,718.00 Finance Less than 2 years 7 $ 79,081.00 Non-Finance More than 5 years B $ 48,621.00 Finance Less than 2 years 9 $ 72,835.00 Non-Finance More than 5 years 10 $ 54,768.00 Finance 2 to 5 years 11 $ 52,282.00 Finance 2 to 5 years 12 $ 55,632.00 Finance Less than 2 years 13 $ 63,856.00 Non-Finance Less than 2 years 14 $ 51,827.00 Finance 2 to 5 years I 15 5 51,948.00 Finance Less than 2 years 16 5 56,588.00 Finance 2 to 5 years 17 5 68,858.00 Non-Finance Less than 2 years 18 5 63,478.00 Non-Finance Less than 2 years 19 5 83,846.00 Non-Finance 2 to 5 years 20 $ 59,253.00 Finance More than 5 years 21 $ 53,464.00 Finance Less than 2 years 22 $ 83,176.00 Non-Finance 2 to 5 years 23 $ 60,949.00 Finance More than 5 years 24 $ 52,833.00 Finance Less than 2 years 25 $ 72,914.00 Non-Finance More than 5 years 26 5 83,040.00 Non-Finance 2 to 5 years 4548 26