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Joe Brown, a financial planner at Ajax Inc., has been asked to suggest how the company can temporarily obtain $300,000 in additional funds needed over the next few months. Joe considered slowing payments to suppliers by an average of four days, which he believes could raise the $300,000 needed. However, Edward Smith, a respected colleague, argues this would be unethical since Ajax has no legitimate reason to delay payments. As head of the organization, the best solution would be to reduce workers to lower costs and increase earnings, enabling Ajax to finance its temporary increase in working capital needs without taking on debt or acting unethically.

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203 views2 pages

Instructions

Joe Brown, a financial planner at Ajax Inc., has been asked to suggest how the company can temporarily obtain $300,000 in additional funds needed over the next few months. Joe considered slowing payments to suppliers by an average of four days, which he believes could raise the $300,000 needed. However, Edward Smith, a respected colleague, argues this would be unethical since Ajax has no legitimate reason to delay payments. As head of the organization, the best solution would be to reduce workers to lower costs and increase earnings, enabling Ajax to finance its temporary increase in working capital needs without taking on debt or acting unethically.

Uploaded by

Arvie Espedido
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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V.

ELABORATE:

Case 1: St. Andrew College of Business and Science: Who can I turn to?

1. From the case below, what do you think Joe would recommend after the discussion?
After the discussion, Joe would recommend that they need to reduce workers so that
Ajax can obtain the use of an additional $300,000. The other recommendation is slowing
the payment, however if they slowing the payment of Ajax’s accounts payable, it was
not the ethical thing for the firm to do especially if they have no valid or legitimate
reason. That is why the best recommendation is reduction of workers.

2. If you are the head of the organization, what do you think is the best solution for this
problem?
If I were the head of the organization, the best solution for this problem is also
reduction of workers to be able to increase earnings of Ajax Inc. Thus, reduction of
workers can help the firm lower costs while simultaneously enabling it to keep more of
its earnings. 

3. Enumerate the pros and cons of this problems.


PROS
Ajax would prefer to avoid borrowing from its banks or other financial institutions, or
collateralizing any of its assets so that they will not be in debt.
If it will happen again, they have some knowledge to avoid or fix the problem.
They are working as one to solve the problem.

CONS
Joe’s suggestion which is slowing the payment of Ajax’s accounts payable is unethical
thing to do and it may be ruin the image of the firm. Also, others will lose trust in them.
Their plan to their business is complicated that is why the money that they have is not
enough to support what they need.
If it weren't for its inability to obtain enough of Part P6729, a critical component in its
newest and fastest selling product, Ajax Inc. would have been well on its way to financial
success. But the delayed delivery of that part significantly increased the new firm’s work in
process. That, in turn, increased the demand for working capital as the firm stockpiled
unfinished product in anticipation of delivery of Part P6729. In addition to its cash reserves of
$616,000, Ajax needs $300,000 for the next few months to finance its temporary increase in
working capital. Joe Brown, a financial planner at Ajax, has been asked to suggest how to
temporarily obtain the additional funds. In order to look as good as it can to the financial
community, Ajax wants to make its financial statement be as attractive as possible. For this
reason, Ajax would prefer to avoid borrowing from its banks or other financial institutions, or
collateralizing any of its assets. Joe is considering slowing the payment of Ajax’s accounts
payable. While the firm takes full advantage of its trade credit, it does carefully observe its
trade credit terms. Joe maintains that by quietly delaying the payment of its bills by four
additional days on the average, Ajax can obtain the use of an additional $300,000. He feels the
firm will be able to do this for at lease a couple of months before suppliers begin to complain.
By then, the firm will no longer need the additional funds. Joe discussed his proposal with some
of his colleagues. Some wondered if the firm’s suppliers would go along with the plan. Others
doubted extending payment by only four days would raise that much money. But Edward
Smith, a colleague whose opinions Joe respects, questions whether the firm should even be
considering the proposal. He was not concerned about whether the plan is practical, feasible, or
do-able. Rather, he felt it was not the ethical thing for the firm to do.

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