Apply Your Knowledge Ethics in Action Case 1. Rob Peterson works as a salesperson at Consolidated Systems, Inc. In addition to a base monthly salary, Rob receives a commission based on the amount of sales he makes during the month. Rob was hoping to have enough money for a down payment on a new car, but sales have been low because of a downturn in the economy. Rob was aware that Consolidated Systems, Inc., granted credit terms of 2/10, n/30 to its credit customers. In addition, Rob knew that Consolidated Systems, Inc., had a "no questions asked" return policy. Based on this knowledge, Rob had an idea. He contacted a regular customer and convinced the customer to purchase a substantial amount of merchandise so that he could earn the commission on the sale. Rob explained to the customer that he would not have to pay for the goods for 30 days and that he could return part, or all, of the goods before paying for them. However, Rob asked the customer not to return any of the goods until the following month to ensure that he would earn the full commission. Requirements 1. Do you feel Rob acted unethically? Why or why not? 2. How can Consolidated Systems, Inc., deter actions like Rob's? Case 2. Dolly Harding owns and operates Dolly Jo's Caf. Dolly has requested a credit application from LRM, Inc., a major food supplier from which she hopes to begin purchasing inventory. LRM, Inc., has requested that Dolly submit a full set of financial statements for Dolly Jo's Caf with the credit application. Dolly is concerned because the most recent balance sheet for Dolly Jo's Caf reflects a current ratio (current assets divided by current liabilities) of 1.24. Dolly has heard that most creditors like to see a current ratio that is 1.5 or higher. To increase Dolly Jo's Caf's current ratio, Dolly has convinced her parents to loan the business $25,000 through an 18-month long-term note payable. Dolly's parents are apprehensive about having their money "tied up" for over a year. Dolly reassured them that even though the loan is for 18 months, Dolly Jo's Caf can, and probably will, repay the $25,000 sooner. Requirements 1. Discuss the ethical issues related to the loan from Dolly's parents. 2. Why do you think creditors like to see current ratios of 1.5 or higher