Reply Discussion 4 Accounting th

ACME Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Bill, the owner of ACME, has decided he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. Bill told the customers he would allow them, until the end of February, to pay for the purchases, just as if they had made their purchases in January. Explain if you think there are ethical implications of Bill’s actions. Which ratios will be affected, and how, by accelerating these sales? By having the customers make their origional purchase in december instead of january it would inflate the sales for the year. Which would show on his income statement and would be fraudulent information for the bank to consider. Ithink it would be ethicaly wrong. This would affect the horizontal ratio as this would show higher sales than would normal compared to previous years.

class, what is working capital? How is working capital relevant in the ACME scenario?

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