Bombadier Industries manufactures aircraft-related electronic devices. Bombadier
ID: 2374670 • Letter: B
Question
Bombadier Industries manufactures aircraft-related electronic devices. Bombadier borrows heavily to finance operations. Often Bombadier is profitable because it can earn operating income much higher than its interest expense. However, when the business cycle has turned down, the company's debt burden has pushed the company to the brink of bankruptcy. Operating income is sometimes less than interest expense.
Respond to the following questions and, if appropriate, include personal experience as part of your answers.
Explanation / Answer
1. No, it is not unethical for managers to take too much risk. Its just a risky policy which the company has. The company is not risk averse and likes taking risks.
2. The stakeholders of the company can get hurt. If the company is unable to meet its fixed high costs then the creditors may sue the company and the company may be liquidated to pay the debts. hence all the shareholders will also suffer.