Week Two Discussion Questions - Essay Example

A company with a higher debt to equity ratio is generally preferred by lenders because it indicates that the company has low degree of debt and thus, it may be able to return the borrowed funds as compared to a company with higher level of debts. However, other factors are considered as well before the final decision is made regarding whether to lend money or not. A dividend is paid to shareholders as a reward of their investments in the company’s assets. However, if the company is not doing well financially, has earned losses, or there is a big capital expenditure planned in the next year; there may be a point of not paying dividends.

Shareholders would certainly prefer to receive dividends as it increases their wealth. 3. Discuss- I think I have mentioned previously that most financial statement frauds are perpetrated by what we refer to as the "C-Suite," i.e., the CFO, CEO, CIO, COO, and other senior executives who work in collusion. I completely agree to the article’s contents. CEOs know their companies inside out and are in best positions to commit a fraud. In recent times, we saw that the CEO of Satyam, an Indian IT outsourcing company, was arrested for conducting similar frauds.

He inflated his balance sheets by way of recording fictitious receivables. The receivables were recorded by selling to fictitious companies. According to one of his interviews, he was under pressure to show better performance and in order to conceal the modest performance of the company; he had to do something ‘out of the box’. Unfortunately, the only thing he was successful to do was against the law. Yes, I agree. Travel related frauds are some of the most common fraud cases. Although, these are not very huge in magnitude (in terms of amounts involved) yet the volume and frequency of occurrence is quite high.

Most of the times, it is very difficult to detect these as