Utah Light, Inc has a takeover offer from Cal Corp Utah Light is experiencing difficulty with earnings and its share price has dropped from $32 to $19. Cal Corp's offer is for $23 per share. Utah Light's board feels that because of pending plans and developing assets, it should not accept the offer. Must the board accept the offer?
No, the case is a classic illustration of the business judgment rule. The decision is supportable even though others may disagree - the directors are protected.
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The Baccus Corp manufactures medical equipment. This is a capital intensive industry and investments in fixed assets exceed $5 million a year. The minimum cost for production equipment is $75,000 . When supervisors want new production machinery, they
contact the plant manager. The plant manager approves or denies the request based on discussions with the production supervisor, the repair and maintenance supervisor, and the quality control supervisor. A purchase order is prepared by the purchasing department and sent to one of the three major suppliers of production machinery for medical equipment. The equipment is delivered immediately to the production floor and put into service. At the end of the month, the production supervisor informs the general ledger clerk about the receipt of the machinery. The general ledger clerk establishes an asset record for the machine. At the end of the year, the general ledger clerk computes straight-line depreciation based on a 10-year life with a 10 percent salvage value. Depreciation expense is recorded as a direct reduction of the asset cost. The repair department performs routine maintenance on all of the production equipment. Occasionally the repair department rebuilds a machine to extend its useful life. All of the costs associated with the repair department are charged to manufacturing overhead. When a machine becomes obsolete, production employees move it to a corner of the factory floor and break it down so that parts can be used in other machines. Production employees routinely remove parts for personal use. Some smaller machines have disappeared completely from the factory floor. The general ledger clerk takes a physical inventory every three years. About 75 percent of the fixed assets can be located and identified. Other assets have serial numbers that are inaccessible, so the item cannot be matched to a fixed asset record. Some fixed asset records cannot be traced to an actual item. Several machines that have been scrapped and are being used for spare parts were matched to fixed asset records. At the last inventory, the general ledger clerk did not make any adjustments to the fixed asset records explaining that 75 percent accuracy in the fixed asset physical inventory was excellent. Describe five internal control weaknesses and explain how to correct them.
An advantage of the single-step income statement over the multistep form is
a. the amount of information it provides. b. its simplicity. c. its comprehensiveness. d. its use in computing ratios.
During the market introduction stage of the product life cycle,
A. much money is spent for Product, Place, and Promotion. B. large profits are typical until competition arrives. C. all forms of expenditure on Place and Promotion are put on hold. D. most customers are looking for the new product. E. Price and Promotion are more important than Place and Product.
________ media are used to reach those people in the target market the primary media may not have effectively reached and to reinforce their messages.
A. Traditional B. Support C. Advertising D. Direct response E. Sales promotion