Case Study on Investment
Unit 1 Case Study:
3. The dilemma I face now is to inform all the investors of the inaccurate information the accountant provided and that in fact, the team is losing money. The biggest problem is that no one should be receiving a check for their investments. The team is surprisingly operating with a loss yet investors are getting paid. The season ticket revenue does not provide reliable information to an outsider because revenue would not be placed until 2009. The $100,000 advertising revenue on the income statement does not represent the reality of the transaction because the contract required a certain amount of fans which Lakeside did not achieve. I do have a responsibility to share these revisions with the other three owners because they are investors too. It’s important for everyone to know if a company/team is profiting or failing in order to make changes right away to avoid worse problems like bankruptcy. My responsibility to the bank is to inform them the loan may not be able to be paid on time due to an unprofitable season.
4. a) Investors, bank, employees, and players will be harmed. b) Investors will be harmed because not only did they lose their initial capital, they now owe money to the bank. The bank’s debt will not be repaid or if they could get repaid, payment will be very late so bank will suffer a loss. Employees will suffer because the company will be laid off. Players will not be able to be paid and also suffer a financial loss. c) Rights and claims will be violated because the team will not be able to make payments to creditors. d) Controller who is also one of the owners income is based on single-game and season ticket revenue. e) My responsibility is to provide the correct information to all investors, owners, managers, bank, and employees. f) Initially, the company provided incorrect and biased income statements/statement of retained earnings/balance sheet in order to seem like the team was profitable
3. The dilemma I face now is to inform all the investors of the inaccurate information the accountant provided and that in fact, the team is losing money. The biggest problem is that no one should be receiving a check for their investments. The team is surprisingly operating with a loss yet investors are getting paid. The season ticket revenue does not provide reliable information to an outsider because revenue would not be placed until 2009. The $100,000 advertising revenue on the income statement does not represent the reality of the transaction because the contract required a certain amount of fans which Lakeside did not achieve. I do have a responsibility to share these revisions with the other three owners because they are investors too. It’s important for everyone to know if a company/team is profiting or failing in order to make changes right away to avoid worse problems like bankruptcy. My responsibility to the bank is to inform them the loan may not be able to be paid on time due to an unprofitable season.
4. a) Investors, bank, employees, and players will be harmed. b) Investors will be harmed because not only did they lose their initial capital, they now owe money to the bank. The bank’s debt will not be repaid or if they could get repaid, payment will be very late so bank will suffer a loss. Employees will suffer because the company will be laid off. Players will not be able to be paid and also suffer a financial loss. c) Rights and claims will be violated because the team will not be able to make payments to creditors. d) Controller who is also one of the owners income is based on single-game and season ticket revenue. e) My responsibility is to provide the correct information to all investors, owners, managers, bank, and employees. f) Initially, the company provided incorrect and biased income statements/statement of retained earnings/balance sheet in order to seem like the team was profitable