DQ 1The Statement of Cash Flows
From Chapter 14, Fraud Case 14-1. Complete all parts of the case and respond to at least two of your classmates’ postings by Day 7.
Frank Lou had recently been promoted to construction manager at a development firm. He was responsible for dealing with contractors who were bidding on a multi-million dollar excavation job for the new high-rise. Times were tough, several contractors had gone under recently, and the ones left standing were viciously competitive. That morning, four bids were sitting on Frank’s desk. The deadline was midnight, and the bids would be opened the next morning. The first bidder, Bo Freely, was a tough but personable character that Frank had known for years. Frank had lunch with him today, and after a few beers, Bo hinted that if Frank “inadvertently” mentioned the amount of the lowest bid, he’d receive a “birthday card” with a gift of cash. After lunch, Frank carefully unsealed the bids and noticed that another firm had underbid Bo’s company by a small margin. Frank took Bo’s bid envelope, wrote the low bid amount in pencil on it, and carried it downstairs where Bo’s son William was waiting. Later that afternoon, a new bid came in from Bo’s company. The next day, Bo’s company got the job, and Frank got a birthday card in his mailbox.
1.Was Frank’s company hurt in any way by this fraudulent action?
2.How could this action hurt Frank?
3.How can a business protect against this kind of fraud?
DQ 2Financial Statement Analysis
Discuss what high current ratios indicate and why are businesses with extremely high current ratios (example: 25.0) at risk? Explain what a high accounts receivable turnover indicates to a business? Respond to at least two of your classmates’ postings.