Pit Bull Enterprises has numerous investments in debt and equity securities. The
ID: 2504435 • Letter: P
Question
Pit Bull Enterprises has numerous investments in debt and equity securities. The comptroller Christina Wecker is preparing its year-end financial statements and is in the process of classifying for the first time the securities in the portfolio.
The poor economy in the past year has caused the portfolio's overall fair value to substantially decline; however, some securities have increased in value and others have decreased. Wecker earns a bonus each year, which is computed as a percent of net income.
Wecker presents a schedule classifying the securities for the COO's review. In reviewing the schedule the COO notices that the securities that have increased in value have been classified as trading securities while the securities that have decreased in value are classified as long-term available-for-sale securities.
Required:
Who are the stakeholders in this situation?
Will Wecker's bonus depend in any way on the classification of the securities? Explain.
In your opinion, is Wecker being ethical in her method used to classify the securities? Explain.
Explanation / Answer
Stakeholders are broadly defined as anyone who is impacted by a decision-maker's decision. Some examples of corporate stakeholders would be shareholders, employees, customers, suppliers, financiers, families of employees and the community in which the corporation is located. Stakeholders could also be less directly related to the operations of a corporation. For example, taxpayers who later need to fund a government rescue of a distressed company, the government and even those suffering the effects of corporate pollution are all stakeholders, in that they have a stake in decisions.
Wecker is one of the stakeholder.All the people working in Pit Bull Enterprises are stakeholders.
Wecker's bonus will depend on the classification of the debt securities because her bonus is computed as a percentage of the company's net income
yes, it is variable at times.wecker is being ethical in her method because she is not harming any company in the process and she just wants her bonus to be right