Then, read the Ethics Challenge Case 1-7 on page 63 in your text. Answer the following questions below.

Question 1: What made the CEO decide on reporting only the 4 ratios?

Question 2: What are the possible consequences of the CEO’s reporting decision?

Question 3: As controller, what advice would you give the CEO regarding his/her disclosure?

Question 4: What actions would you advise the company to take now? (and going forward)

Just do response each posted # 1to 3 down below only.

Posted 1

Good evening classmates,

Question 1: What made the CEO decide on reporting only the 4 ratios? The CEO only wanted to report on those four ratios, because they all show steady improvements from each previous year.

Question 2: What are the possible consequences of the CEO’s reporting decision?If a potential investor was only given these four ratios, they wouldmost likely want to invest in Tallman Company. These four ratios wouldallude you to believe that everything for the business is looking up.Sales are up, costs are down, assets are being used well, and thecompany can easily pay their current debts, which means me as apotential investor should see a nice return on my investment(Subramanyam, 2014, p. 63).

Question 3: As controller, what advice would you give the CEO regarding his/her disclosure?As a controller, you have the ethical responsibility to ensure thatyour company reports fairly and accurately, and that means the good datawith the bad data. For an investor or a creditor, they need all of thefinancial data to make an informed decision. By only providing partialdata, you are deceiving the users of the data of the true financialpicture of Tallman Company.

Question 4: What actions would you advise the company to take now? (and going forward)The controller has the responsibility to inform the CEO that ethically,Tallman Company must report all of the data, not just the positivedata. By not reporting all the data, Tallman Company’s reputation couldbe damaged, which means it will be harder to raise outside sources offunding moving forward. Acting ethically, they must show the good andthe bad, to show that they are reporting faithfully and accurately, inorder to boost their credibility and be considered a reliable investmentand a company to do business with.

Posted 2

TheCEO of Tallman Company clearly chose to report on those four ratiosbecause they are improvements over prior years. The ratios showpositive, upward trends for the company. A significant possibleconsequence for the CEO’s reporting decision is misleading the board ofdirectors, potential and current investors, and financial analystsregarding the overall financial health of the company. As controller, Iwould advise the CEO to present all financial statement information andcalculated ratios as well as explanations for varying increases anddecreases within the financials. It is the CEO’s responsibility to keepthe board of directors informed about the company and potential futurefinancial issues that may arise as a result of current company, market,or industry downturns. Actions for the company to take now includecomparing financial ratios to competitors within the same industry,thoroughly examining the reasons for declining ratios or margins, anddeveloping short-term and long-term plans for improvement in areas such as operating efficiencies or increasing sales.

Posted 3

Question1: The CEO may have decided on only reporting 4 ratios because theother ratios may reveal the real status of the business. Some ratios mayreveal that a business is doing good but when other ratios arecomputed, it may turn out that the business is not doing as good as thefirst ratios depicted.

Question 2: Possible consequences may be getting removed from the CEOposition due to the fact that she is leaving out material information.

Question 3: I would tell the CEO to release all informationavailable. At the end of the day, it is the right thing to do. Omittingimportant information could get her in trouble and possibly fired.

Question 4: Actions that should be taken now are to write the CEO up.Going forward the CFO needs to be with the CEO when dealing withsituations as such. The CFO can help the CEO better articulate thesituation and explain the reasoning behind some of the ratios that arenot very attractive. If the CFO is there, he or she can relieve the CEOof any uncertainty when explaining the ratios.