Question: ETHICS PROBLEM: CH 1 2 Reference: Information asymmetry lies at the heart of the ethical dilemma that managers, stockholders, and bondholders confront when companies initiate

ETHICS PROBLEM:

12

Reference: "Information asymmetry lies at the heart of the ethical dilemma that

managers, stockholders, and bondholders confront when companies initiate management buyouts or swap debt for

equity." Comment on this statement. What steps might a board of directors take to ensure that the

company's actions are ethical with regard to all

parties?

13

Reference: Assume that you are the CFO of a company contemplating a stock repurchase next quarter. You know that there are several methods of reducing the current quarterly

earnings, which may cause the stock price to fall prior to the announcement of the proposed stock repurchase. What course of action would you recommend to your

CEO? If your CEO came to you first and recommended reducing the current

quarter's earnings, what would be your

response?

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