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Potential Costs and benefits to Henley Manufacturing - Essay Example
Author : agutmann
Finance & Accounting
Pages 3 (753 words)
Potential Costs and benefits to Henley Manufacturing In most cases, when a firm decides to announce its financial statements information to the shareholders during annual meetings, there are costs and benefits involved…
In this case of Henley Manufacturing, by announcing its sales and earnings goals at the shareholders’ meeting, it is likely to undergo the following in terms of costs and benefits. Costs for disclosure: An announcement of sales increase by 15% and net income by 20% to the shareholders may be deemed by them as a source for pay increase demand by the managers and other employees. As such, the shareholders may resort to hiring new managers to replace current ones should they demand for huge pay rise. In this case, the announcement would serve as a cost to both the shareholders who will incur costs recruiting new managers and employees, as well as to the managers and employees as they will likely lose their jobs if they persist on pay rise. Second, such disclosure will imply the organization incurring information costs such as those of obtaining, gathering collating, maintaining, summarizing, and communicating the data on the financial statements effectively to the intended external users such as shareholders. Other costs under this category would be cost of auditing the reports before announcement, the cost to accounting staff tasked with maintaining the firm’s financial statements, as well as the cost of printing the same and mailing to all the shareholders before the annual meeting day ...