Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 1, Problem 1.5WUE
Recently, some branches of Donut Shop, Inc., have dropped the practice of allowing employees to accept tips. Customers who once said, “Keep the change,” now have to get used to waiting for their nickels. Management even instituted a policy of requiring that change be thrown out if a customer drives off without it. As a frequent customer who gets coffee and doughnuts for the office, you notice that the lines are longer and that more mistakes are being made in your order.
Explain why tips could be viewed as similar to stock options and why the delays and incorrect orders could represent a case of agency costs. If tips are gone forever, how could Donut Shop reduce these agency costs?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You are working as a summer intern at a rapidly growing organic food distributor. Part of your responsibility is to assist in the accounts payable department. You notice that most bills from suppliers are not paid within the discount period. The manager of accounts payable says the bills are organized by vendor, like the accounts payable ledger, and she is too busy to keep track of the discount periods. Besides, the owner has told her that the 1% and 2% discounts available are not worth worrying about.
Mrs. Paul the owner of several supermarkets across the country is concerned about the errors being made by the cashiers while carrying out their daily duties. Customers are constantly complaining about being overcharged for items and this has significantly affected customer service. Mrs. Paul is very worried and has sought your help on this matter. Her inventory and the cashiering system only carry prices that are stuck to each item, which then needs to be manually entered to calculate the final price.
what is the underlying problem as it relates to the errors being made and recommend a solution, incorporating technology, to avoid a reoccurrence of this going forward?
1. You are in line to check out at your favorite bagel store when the customer in front of you reaches for cream cheese in a container in a refrigerated area. You notice
she drops a $20 bill. She just paid for her food and left the store. You’re late for work already and your boss is a stickler for punctuality. What would you do
assuming you can catch up with the customer?
Chapter 1 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 1.1 - Prob. 1FOPCh. 1.1 - Prob. 1.1RQCh. 1.1 - Prob. 1.2RQCh. 1.1 - Prob. 1.3RQCh. 1.1 - Prob. 1.4RQCh. 1.1 - Prob. 1.5RQCh. 1.1 - Prob. 1.6RQCh. 1.2 - Prob. 1.7RQCh. 1.2 - Prob. 1.8RQCh. 1.2 - Prob. 1.9RQ
Ch. 1.2 - Prob. 1.10RQCh. 1.2 - Prob. 1FOECh. 1.2 - Prob. 2FOECh. 1.3 - Prob. 1.11RQCh. 1.3 - Prob. 1.12RQCh. 1.3 - Prob. 1.13RQCh. 1.3 - Prob. 1.14RQCh. 1.4 - Prob. 1.15RQCh. 1.4 - Prob. 1.16RQCh. 1.4 - Prob. 1.17RQCh. 1.4 - Prob. 1.18RQCh. 1 - Prob. 1ORCh. 1 - Learning Goal 4 ST1-1 Emphasis on Cash Flows...Ch. 1 - Prob. 1.1WUECh. 1 - Prob. 1.2WUECh. 1 - Prob. 1.3WUECh. 1 - Prob. 1.4WUECh. 1 - Recently, some branches of Donut Shop, Inc., have...Ch. 1 - Prob. 1.1PCh. 1 - Prob. 1.2PCh. 1 - Prob. 1.3PCh. 1 - Prob. 1.4PCh. 1 - Prob. 1.5PCh. 1 - Prob. 1.6PCh. 1 - Prob. 1SE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- A local pharmacy company has been in business for many years. Recently the company got into some trouble because investors wanted to know why the profits were trending downward. So the management of this company decided they were going to change a few things. The management has decided that the new policy for recognizing revenues for the pharmacy businesses will be when the customer drops off the prescription. The controller, William asked about what if the customer does not pick up their prescription. The management stated that we don’t get a lot of people that don’t pick up their prescriptions. Management states this will recognize our revenue quicker and hopefully this will increase our cash flow. We must keep our investors happy. William, the controller has come to you as an outside CPA to research this change in revenue recognition. Please explain the 5-step revenue recognition policy that is now GAAP. Demonstrate how this follows this revenue recognition rule. Please provide…arrow_forwardthe supervisor tells you to change the aging category of a large account from over 120 days to current status and prepare a new invoice to the customer with the revised date and that agrees with the new category this will change the required allowance of uncollectible accounts from $180,000 to $135,000. Identify the key internal and external stakeholders. what are the negative impacts that can happen if you do not follow the instructions of the supervisor?arrow_forwardYou are working as a summer intern at a rapidly growing orgainc food distribution. Part of your responsibility is to assist in the accounts payable department. You notice that most of the bills are not paid with in discount period. The manager of the accounts payable sees the bills are organized by vendor, like the accounts payable ledger, and she is too busy to keep track of the discounts period. Besides, the owner has told her that The 1% and 2% discount available or not worth worrying about. 1. Explain to the owner why it is expensive not to take it advantage to cash discounts on credit purchases. suggest a way to file (organize) suppliers invoices so that they are paid with in the discount period.arrow_forward
- A retail store normally has three people working in the evening. All of the employees have access to the same cash register. For the last month, the cash count at the end of the evening has been recording losses. The losses range from $5 to $300. So, the manager has decided to be the only one to count the cash at the end of the evening to keep the losses from happening. Discuss if the change made by the manager is a good one. Will the losses keep happening, or will this change prevent losses due to theft? What other recommendations and changes should be considered by this manager?arrow_forwardBoxes-and-Stuff, a box-packing and mailing company in a small town along the Gulf Coast, lost a key employee last month when its accounting manager was fired for embezzling company money. Now, the owners of Boxes-and-Stuff, Jerome and Natalia, need to find another accounting manager fast. But as they hurry to fill the position, they don't want to select a dishonest or incompetent employee. They need to be cautious. Fortunately, the police chief found the embezzled funds in a bank account set up by the former employee and authorized the return of the money. This means that Boxes-and-Stuff will not lose the embezzled amount, after all. However, Jerome and Natalia are already thinking of ways to protect their company from other risks. They want to be prepared for risky situations in the future. Questions: 1. Which risks do you think Boxes-and-Stuff might face?arrow_forwardBoxes-and-Stuff, a box-packing and mailing company in a small town along the Gulf Coast, lost a key employee last month when its accounting manager was fired for embezzling company money. Now, the owners of Boxes-and-Stuff, Jerome and Natalia, need to find another accounting manager—fast. But as they hurry to fill the position, they don’t want to select a dishonest or incompetent employee. They need to be cautious. Fortunately, the police chief found the embezzled funds in a bank account set up by the former employee and authorized the return of the money. This means that Boxes-and-Stuff will not lose the embezzled amount, after all. However, Jerome and Natalia are already thinking of ways to protect their company from other risks. They want to be prepared for risky situations in the future. 1. Which risks do you think Boxes-and-Stuff might face? 2. How do you think the company should handle the risks you’ve identified?arrow_forward
- Davis Construction Company has not been doing very well lately. The controller is looking over the invoices for bills that need to be paid this week, and realizes the company is approximately $7,000 short. The only account with excess cash is mandated to be used only for cases of workers' compensation. Can the controller pull the money from that account? O No, that is a short-term investment account, and the money cannot be converted into cash that quickly. O Yes, it is a cash equivalent account, which can be used to supply the money for the bills as long as the money is replaced within the month. O No, that is restricted cash and the money cannot be taken out to cover other expenses. O Yes, it is restricted cash, but as long as the money is replaced within a month of being taken out, it will balance out fine.arrow_forwardA payday loan company has decided to open several new locations in a city and hires consultants to decide where to open these locations. The consultants are paid per store that is opened, and at the end of the quarter, the company notices a many of the new stores' sales volume fail to meet expectations. To incentivize the consultants to instead focus on opening profitable stores, the company decided to alter the compensation to a percentage of the profit earned per new store. This puts the consultants_ and the payday loan company should expect to compensate for this change. to Group of answer choices 1. In a less risky position; pay the consultants more than they would in the per- store scheme 2. A more risky position; pay the consultants less than they would in the per- store scheme 3. In a less risky position; pay the consultants less than they would in the per- store scheme 4. A more risky position; pay the consultants more than they would in the per- store schemearrow_forwardA large company has hired your friend. She tells you that her boss has asked customers to sign sales agreements just before year end indicating a sale has been made.The boss told customers that he will give them 30 days (well into the next year) to change their minds. If they do not change their minds they will quickly receive the merchandise. If they do change their minds he promised to cancel their orders, take merchandise back, and cancel the invoices.Your friend has been told by her boss to recognize the sales agreements as revenue this year. Your friend has concerns about recognizing revenue before the merchandise is shipped. She likes the company and wants to keep her job.What do you advise her to do?arrow_forward
- Harmony is the Senior accountant of a Bank. Junior accountants of all the branches reportto her. While preparing for the final quarter sales report, she finds that two out of the fourbranches have failed to achieve the sales targets for the second consecutive quarter.According to the company policy, the branches that fail to achieve targets in twoconsecutive quarters have to be closed. Harmony feels sad for all the people losing theirjobs and decides that she will overstate the sales revenue generated by every branch andreport manipulated figures in the financial statements. Answer the following questions. Describe Harmony’s actions from ethical standpoint. Is she doing the right thing? What can be the consequences of Harmony’s actions. What are the risks involved? What would you suggest to Harmony? (please cite paragraph according to the MLA citation? Please note this is not an essay.arrow_forwardAnita Brown is the manager of a wholesale food company. Her compensation, in part, is incentive-based. In other words, the higher the company income, the higher her incentive compensation. Each year, in an effort to influence her bonus, Anita makes several recommendations, concerning adjusting entries, to the company controller. One of her favorites is to ask the controller to reduce the estimate of doubtful accounts.1. How does lowering the estimate of doubtful accounts affect the income statement and balance sheet?2. Is there an ethical consideration in this case? If so, what is it?3. Should Anita be permitted to weigh in on adjusting entries under these circumstances? Why or why not?arrow_forwardimmy Pace has recently been hired as the manager of Jittery Jon’s Coffee Shop. Jittery Jon’s Coffee Shop is a national chain of franchised coffee shops. During his first month as store manager, Jimmy encountered the following internal control situations:a.Jittery Jon’s Coffee Shop has one cash register. Prior to Jimmy’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Jimmy made one employee on each shift responsible for taking orders and accepting the customer’s payment. Other employees prepare the orders.b.Because only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash in the drawer matches the amount of cash sales recorded by the cash register. Jimmy expects each cashier to balance the drawer to the penny every time—no exceptions.c.Jimmy caught an employee putting a case of 1,000 single-serving tea bags in her car.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
ACCOUNTING BASICS: Debits and Credits Explained; Author: Accounting Stuff;https://www.youtube.com/watch?v=VhwZ9t2b3Zk;License: Standard Youtube License