Ethical Dilemma Essay: Ethical Dilemma Stock dividend instead of cash Essay

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Ethical dilemma {Stock dividend instead of cash: The investors will never know !} … {page 819}

Ethical Dilemma ( Stock dividend instead of cash: The investors will never know!) Best Ski Manufacturer usually pays a cash dividend sufficient to give investors a dividend yield ( annual dividend divided by stock price) of around 6%. Last quarter, Best Ski Manufacturer paid a quarterly cash dividend of $ 1 per share. Its stock price is currently at $ 65 per share. In the current quarter, Best Ski has suddenly experienced a big slowdown in ski equip-ment orders. The vice president of finance unequivocally stated that Best Ski just didnt have the cash to pay another cash dividend of $ 1 per share. She suggested that Best Ski make a public announcement explaining the situation to shareholders. This suggestion infuriated the chief executive officer, who subsequently insisted that nothing be done to make the shareholders nervous or pessimistic about Best Skis future prospects. The controller ( your boss) came to the rescue with an accounting solution to the prob-lem. He proposed that Best Ski declare a 10% stock dividend in place of the regular quar-terly cash dividend. He said that a stock dividend is merely a cosmetic increase in the num-ber of shares, with no associated cash flow, either into or out of the company. However, he claimed that investors would never know the difference between a cash dividend and a stock dividend. The controllers suggestion was met with enthusiasm by the board of directors. The shareholder relations department is drafting a press release to announce the 10% stock dividend. Because of your accounting expertise, you have been asked to help with the wording of the memo. What wording would you suggest?

GENERAL INSTRUCTIONS For Essay Tests: {These instructions are the same for each of the 4 Essay Tests}

The Essay Tests are not writing exercises — Student submissions will be evaluated on content — which MUST have support /corroboration from authoritative sources of G.A.A.P.

Student views or opinions have no value UNLESS supported by reference to an authoritative source for G.A.A.P. — Obviously, research will be required. The ‘I.R.S.’, and Wikipedia are NOT acceptable sources. Their use will cause a deduction of points.

Students may literally copy and paste text, diagrams, etc. from their sources and references — giving appropriate credit to the source of the materials used.

Note – all responses to these cases should have supporting and /or corroborating references, if even only from the text used in this course – failure to do so will affect the exam grade. Citations from our text or any other text should be inclusive of page and para. # –- do not just mention a book’s title, or a chapter #, or cite an F.A.S.B. # without being more specific. Grades of less than ‘A’ {equivalent} in the similar graded exams were mostly due to inadequate, inappropriate, or incorrect supporting data and/or references, and /or failure to fully respond to the case requirements. The supporting data and references are just as important as having the correct response. {Upon doing some research for these cases, it is usually difficult to not come up with the correct response.} Your professor does not want or need to know the ‘answer’, — what is required is that the student researches the issue{s} thoroughly and reports on it, citing references and sources.

The book used for reference with this essay is written by Stice, Intermediate Accounting 16th edition

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