Case 8.3 - 1. Even if the company thinks they will get full...

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1. Even if the company thinks they will get full reimbursement from the insurance company for the loss of inventory due to the malfucncio of the freezer they still should record the inventory loss to remain ethical in their business practices. Assuming is something that can get a company in trouble because if the insurance company does not pick up the costs then they will have to explain to the creditor why they are short inventory. This could cause for problems in the company’s business relationship with the creditor and the creditor might even terminate business. It is always best to remain honest while conducting business because not being honest and ethical can have a snowball effect and not only cause business contracts to terminate but also could lead to investors not wanting to jeopardize there money with a company that has a history of padding the books. 2. It is possible to increase the ratio from the current .8 to 1, after the freezer failure, to the required ratio of 1.2 to 1, but it might raise suspicion to the creditor as to why Avery
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