ACCOUNTING

Accounting



Accounting Assignment

Answer 1: Fox And Co

A. Would this action be expected to achieve its purpose? Explain why or why not?

The decision taken by Fox And Co management to cut cost by reducing staff salaries would definitely enhance owner's wealth. Total operating expenses will be reduced when cost from staff salaries decreases and this will result in higher net income. This net income would be adding to the retain earnings and hence, total owner's equity will enhance. Nevertheless this action would be for short term and only if other things such as revenue and sales are constant. Any fluctuations in sales or revenues will directly impact on the net income. The other reason that this scenario is for short term due to the fact that when company cut salaries, employee turnover increase which means that majority of the employees leaving company. However, when this situation occurs, this will ultimately impact on the company's productivity i.e. on the production and operational transaction will start to reduce (Pearce, 2012, p. 31).

This action of management will increase owner's wealth but for very short duration, rather doing this, company shall invest in formulating new strategies that will increase shareholder wealth. When shareholder wealth increases, this eventually will increase owner's wealth. Hence, the main purpose of company's management should be to maximize shareholder wealth. When running a business the focus of the management is always for long term rather than short term. This decision of reducing cost for staff salaries would not increase owner's wealth for longer period; instead there are possibilities that company might loose their efficient and capable employee (Pearce, 2012, p. 31).

B. What general conclusion can be reached about business's goal and the treatment of other stakeholder (group involved with the business?)

The business goal of Fox And Co is to enhance owner's wealth which is not appropriate. The goal should be to fulfill customer requirement and to satisfy customer. Through this, shareholder wealth enhances and this increases company's profit. Though the goal of corporation and goal of employees differs, corporation want to pay less to the employee while preserving productivity and quality, whereas, employee always seeks to increase their personal wealth that is salary. Hence considering this fact, business goal should always be neutral i.e. in favor for employee, company and stakeholders. This business goal would put company in problem since it shows that company is only working for themselves, customer confident would be reducing when they will observe that company main aim is to increase their own wealth and investor and stakeholder has given no consideration.

As this statement shows that company is working for themselves, stakeholders would be worried since they are working with the company and as they are not giving any consideration to their employees there are possibilities that these stakeholders would be rated or not in any company success.

The treatment is that Fox And Co should have a goal that cover customer, employee, investors and other stakeholders as a part of company ...