Raintree Cosmetic Company Case - 1044 Words

BUS A311 Case # 1 9/19/2012 Raintree Cosmetic Company Case Analytical Model Steps 1. Facts: * Raintree must maintain a current ratio of at least .9 in order to maintain the terms of the debt agreement in place with the bank. If Raintree fails to do so, the cost of borrowing from the bank will likely increase. * Raintree company controller, Jackson Phillips, estimates that the 2013 year-end assets and liabilities will be $2,100,000 and $2,400,000 respectively. This scenario would put Raintree’s current ratio at .875, .025 lower than the required benchmark according to the terms of the financing covenant with the bank. * Jackson Phillips recommends purchasing an additional $600,000 worth of inventory on†¦show more content†¦Alternative (B): Positive Consequence: Raintree financial statements reflect accurate level of financial health via actual information. Jackson Phillips maintains his professional integrity and the company may choose to commend him for his accuracy and integrity regarding financial documents. Negative Consequence: Jackson Phillips may become a sort of scapegoat for the lower than expected current ratio. This may cause Phillips to loose his job or become ostracized in some manner by his fellow executives and lower level workers as well as executive bonuses and programs such as profit sharing are affected. Alternative (C): Positive Consequence: The bank may agree to leave the existing financing terms intact despite the lower than expected current ratio level of .875. Raintree financial statements remain accurate and Phillips keeps his job and maintains his integrity in the eyes of his executive superiors and lower level co-workers. Negative Consequence: The bank rejects Jackson Phillip’s attempt to negotiate and seeks to raise interest rates on Raintree’s financing lines. Jackson Phillips loses credibility in the view of his executives and lower level co-workers, possibly resulting in the termination of Jackson Phillips. 7. Decision: Jackson Phillips should choose alternative c. Phillips would sacrifice his personal honesty and integrity in seeking to purchase excess inventory to inflate the currentShow MoreRelatedEssay on Animal Testing Should Be Banned3083 Words   |  13 Pagesbecause doing the experiments on humans would be viewed as unethical and inhumane, but should not the treatment of animals be seen as unethical and inhumane too? The experiments that use animals to test everything from cosmetics to scientific advancements often offer no help to the companies. Animals used to test the effect of certain ingredients do not have the same biology as humans, so the testing often harms or kills thousands of animals and humans a year because of faulty testing (Greek â€Å"Animal Experimentation