QUESTION 4 (8 Marks) A. Your start-up internet services company needs cash, and you are preparing financial statements to apply for a short-term loan. A friend suggests that you treat as many expenses as possible as capital expenditures. REQUIRED: What are the impacts on financial statements of this suggestion? What do you think is the aim of this suggestion? 13 Marks/ B. Mr Lim, the president and CEO of Earth Systems, Inc., a waste management firm, was recently hospitalized, suffering from exhaustion and a heart ailment. Immediately prior to his hospitalization, Earth Systems had experienced a sharp decline in its stock price, and trading activity becane adust nonexistent . The primary reason for this was concem expressed in the media over a new untested waste management system implemented by the company. Mr. Lim had been unwilling to submit the procedure to testing before implementation, but he reluctantly agreed to limited tests after the system was operational No problems have heen identified by the tests to date The other members of management called a meeting to determine what they should do. Mr. Remy, the marketing manager, suggested that the company purchase a large number of shares of treasury stock. In that way, investors might notice that activity had picked up, and might decide to buy some more shares. This plan would use up most of the company's available cash, so that there will he no money available for a cash dividend. Earth Systems has paid cash dividends every quarter for over ten years. REQUIRED: als Mt. Remy's suggestion ethical? Explain. 13 Marks/ b. Is it ethical to discontinue the cash davudend? Explain. 12 Marks