Week 5 db 2 - Ethics Case 21-7 After graduating near the top of his class Bens Naegle was hired by the local office of a big 4 CPA firm in his hometown

Week 5 db 2 - Ethics Case 21-7 After graduating near the...

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Ethics Case 21-7 After graduating near the top of his class, Ben’s Naegle was hired by the local office of a big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experiences, Park Electronics, a large regional consumer electronics chain, hired Ben as assistant controller. This was last week. Now Ben’s initial excitement has turned to distress. The cause of Ben’s distress is the set of financial statements he’s stared at for the last four hours. For some time prior to his recruitment, he had been aware of the long trend of moderate profitability of his new employer. The reports on his desk confirm the slight, but steady, improvements in net income in recent years. The trend he was just now becoming aware of, though, was the decline in cash flows from operations. Ben had sketched out the following comparison: 2011 2010 2009 2008 Income from operations $140,000,000 $132,000,00 $127,500,000 $127,000,000 Net income $38,500,000 $35,000,000 $34,500,000 $29,500,000 Cash flow from operations $1,600,000 $17,000,000 $12,000,000 $15,500,000 Profits? Yes. Increasing profits? Yes. The cause of his distress? The ominous trend in cash flow

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