Please type your responses within this document, and submit this document containing your responses.$$

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Accounting Software Inc. is the leader in providing patented accounting software that simplifies and streamlines the fiscal period end closing process.

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Deb Itt is the president, founder, and majority owner of the company.$$ The company is in dire need of additional capital to keep operating and to bring several promising products to market.$$ Deb Itt, as owner of $51\%$ of the outstanding stock, manages the company$$s operations.$$ She places heavy emphasis on research and development and long$-$term growth.$$ The other principal stockholder is Cred Itt who, as an nonemployee investor, owns $40\%$ of the stock.$$ Cred Itt would like to deemphasize research and development and instead invest in more short$-$term sales goals for existing products.$$ Cred Itt believes the short$-$term strategy would be more effective at raising the stock price for the company.

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All of Deb Itt$$s personal capital and borrowing power is tied up in her $51\%$ stock ownership.$$ She knows that any offering of additional shares of stock will dilute her controlling interest because she would not be able to participate in such an issuance.$$ However, Cred Itt has money and would like to buy enough shares to gain control of the company.$$ He would then dictate the company$$s future direction, even if it means replacing Deb Itt as president and CEO.

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The company already has considerable debt.$$ Raising additional debt would be too costly$,$ will adversely affect the company$$s credit rating, and will increase the company$$s reported losses due to the growth in interest expense.$$ Cred Itt and the other minority stockholders express opposition to issuing more debt, fearing the company would be pushed to the brink of bankruptcy.$$ However, wanting to maintain control of the company, Deb Itt is doing everything to avoid a stock issuance and therefore is contemplating a large issuance of bonds, even if it means the bonds are issued at a high interest rate.

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Part $1$:

Who are the stakeholders in this situation?

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Part $2$:

What are the ethical issues in this case?

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Part $3$:

What would you do if you were Deb Itt?