Jim Tennison, L & B Corporations president, called the companys chief financial officer, Fred Harden, into his office late Friday afternoon. Jim had been reviewing the projected financial statements of L & B Corporation that would be issued as of year-end. Jim told Fred he was worried that the companys liquidity position had been declining over the past two years. Fred assured Jim that the company still had sufficient liquidity, and it had been steadily decreasing its debt. Jim said that there were three or four major stockholders who were very conservative and would raise lots of questions about the companys declining liquidity ratios. Jim and Fred then decided to take out a two-year loan secured by some land L & B Corporation owned, put the cash in the bank, and pay the loan off after January 1. Jim told Fred to account for the transaction as a long-term liability for financial reporting purposes. They agreed that this measure would solve the problem of liquidity at the annual stockholders meeting because the companys ratios would be almost identical to last year. Jim was sure that most of the stockholders were only concerned with net income and ratios.

If you were a stockholder of L & B Corporation, how would you feel about Jim and Freds idea? Have any ethical principles been violated?