Week Seven - Bobby's Bagels - inside knowledge, they were...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This sounds like the opposite of what Martha Stewart went to prison for. Although no one was actually “harmed” by the actions of the managers at Bobby’s Bagels, no one was “helped” either and the whole thing was ethically wrong. This is known as “insider trading” and it is illegal. Whereas Martha dumped stocks that were getting ready to plummet, allowing some poor sucker to buy them and almost immediately have them lose value; the management at Bobby’s Bagels did not allow any potential investors the opportunity to purchase stock because they snatched almost all of it up for themselves, anticipating (correctly so) a major jump in value. With their
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: inside knowledge, they were able to make financial decisions based on information no one else had. The accounting principle related to this situation is the Cost Principle, which states assets must be recorded at their actual (or historical) cost. Based on this principle, the actions of the management were perfectly legal. They bought the stock prior to the price going up. However, the Reliability Principle states accounting information must be accurate and verifiable. The managers purchased the stock based on information not yet recorded in the books....
View Full Document

This note was uploaded on 10/18/2011 for the course LITERATURE LIT 101 taught by Professor Stault during the Spring '11 term at Albany State University.

Ask a homework question - tutors are online