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Ethics - Managerial Decision Making > Unit 4 > Flashcards

Unit 4 Flashcards

1
Q

What is the moving line?

A

You draw an absolute line (ethical code) that you say that you’re never going to cross. Eventually you start to gradually move the line so your comfort level can adjust and you rationalize the moves.

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2
Q

What does it mean to be ethically clueless?

A

You are unaware of the rules

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3
Q

What does it mean to be ethically superior/moral egoist?

A

You believe that rules are made for others less gifted

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4
Q

What does it mean to be inherently ethical?

A

You always do the right thing

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5
Q

What does it mean to be an amoral technician?

A

You find out the rules and laws and function within your parameters

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6
Q

What does it mean to be an ethical schizophrenic?

A

You have one set of ethics at work and another set at home

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7
Q

What does it mean to be an ethical procrastinator/postpone?

A

You know the rules, but decides to worry about them in the future

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8
Q

What does it mean to be an ethical compartmentalizer/rationalizer?

A

You say that everyone does this

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9
Q

What does it mean to be ethically desensitized?

A

You give up on raising ethical concerns

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10
Q

What does it mean to be ethically detached?

A

You go along in a depressed manner

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11
Q

What does it mean to be an ethical chameleon?

A

Your ethics depends on the situation

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12
Q

What does it mean to be an ethical sycophant?

A

You adopt the ethics of those in charge

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13
Q

What is a trade secret?

A

Information of any sort that is valuable to its owner, not generally known, and that has been kept secret by the owner

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14
Q

What are trade secrets protected under?

A

State law

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15
Q

List 7 types of technical and business information that can be protected by trade secret law

A
  1. Customer lists
  2. Designs
  3. Instructional methods
  4. Manufacturing processes
  5. Document-tracking processes
  6. Formulas for producing products
  7. Inventions and processes that are not patentable
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16
Q

What are the 6 factors that are used to determine whether material is a trade secret?

A
  1. The extent to which the information is known outside the business.
  2. The extent to which the information is known by the company’s employees.
  3. The extent of the measures taken by the company to guard the secrecy of the information
  4. The value of the information to the company and it’s competitors
  5. The amount of effort or money used by the company developing the information
  6. How easy it is for others to acquire the information
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17
Q

When is information considered to have value?

A

When it gives rise to actual or potential commercial advantage for the owner of the information

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18
Q

True or False:

A trade secret needs to be unique

A

False

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19
Q

Which type of information isn’t protected under trade secret laws?

A

Information that is generally known

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20
Q

When do trade secret protections attach automatically?

A

When information of value to the owner is kept secret by the owner

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21
Q

What 2 things can you sue under if you cannot make the argument that it is a trade secret?

A
  1. Proprietary information

2. Wrongful interference

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22
Q

When will an item no longer be considered a trade secret?

A

When the requirements for protection, generally the value to the owner and secrecy, stop being met

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23
Q

What is proprietary information?

A

Information in which the owner has a protectable interest

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24
Q

What is wrongful interference?

A

The intentional interference with contractual relations

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25
Q

What are the 3 factors that need to be met in order to justify that wrongful interference with a contractual relationship occurred?

A
  1. The defendant knows about contract between A and B
  2. The defendant intentionally induces either A or B to breach the contract
  3. The defendant benefits from the breach of contract
26
Q

What are the 3 factors that need to be met in order to justify that wrongful interference with a business relationship occurred?

A
  1. There is an established business relationship
  2. The tortfeasor, using predatory methods, causes relationship to end
  3. The plaintiff suffers damages
27
Q

What is a defense against wrongful interference with a business relationship?

A

Bona fide competitive behavior

28
Q

What is earnings management?

A

A process in which business uses accounting rules and financial manipulations to meet goals or make their earnings seem smooth

29
Q

What are the 4 effects of earnings management on the financial market?

A
  1. Markets react to the variability
  2. Investors and creditors like smooth earning
  3. Investors and creditors like it when projected earnings are correct
  4. Investors and creditors rely on financial reports when making decisions
30
Q

In what 2 ways do markets react to variability?

A
  1. It indicates risk

2. Higher risk requires higher return

31
Q

Fill in the Blank:

Smooth earnings = _______

A

Stability

32
Q

How do firms manage earnings?

A

By creatively working within the rules

33
Q

How effective is earnings management at increasing shareholder value?

A

Very effective

34
Q

How do accountants and managers perceive earnings management?

A

They are more likely to accept earnings management and will use a wide variety of methods of earnings management

35
Q

Why are accountants and managers more likely to accept earnings management?

A

They believe it is necessary to increase the value of the company’s stock by influencing investors’ perceptions about the company’s value

36
Q

What is agreement to agree?

A

An agreement between 2 parties where one party is free to back out of the deal after the other party has reflected the revenue from the sale on their financial statements

37
Q

What is channel surfing?

A

It’s when inventory is shipped out before delivery is required so it can be reflected in the quarter sales

38
Q

What is the Bill and Hold Strategy?

A

Products are sold at a discount to retailers and they are held in third-party warehouses to be delivered at a later date

39
Q

What was the job of the Public Company Accounting Oversight Board?

A

To oversee the audit of public companies, establish audit report standards and investigate compliance

40
Q

What 6 things did the Sarbanes-Oxley Act do?

A
  1. Created the Public Company Accounting Oversight Board
  2. Said that auditors must be independent from the companies they audit
  3. Said that audit committees of companies must be members of the company board of directors and must be independent
  4. Required enhanced financial disclosures
  5. Tried to avoid conflicts of interest of securities analysts
  6. Says that new crimes can increase penalties on existing crimes
41
Q

What is an example of Ethically clueless?

A

George Costanza

42
Q

What is an example of Ethically superior/moral egoist?

A

Samjay Kumar

43
Q

What is an example of Inherently ethical?

A

Ed Begley

44
Q

What is an example of an Amoral technician?

A

Andrew Fastow

45
Q

What is an example of Ethical schizophrenic?

A

Tim Donaghey

46
Q

What is an example of Ethical procrastinator/postponer?

A

Andrew Carnegie

47
Q

What is an example of Ethical compartmentalizer/rationalizer?

A

Willy Loman

48
Q

What is an example of Ethically desensitized?

A

Watergate

49
Q

What is an example of Ethically detached?

A

Hewlett-Packard pretexting plan

50
Q

What is an example of Ethical chameleon?

A

Price fixing

51
Q

What is an example of Ethical sycophant?

A

Subprime mortgage scandal

52
Q

What is the difference between tax evasion and tax avoidence?

A

Tax evasion is when you fail to report income or improperly claiming deductions that are not authorized. Tax avoidance is when you lawfully arrange your affairs to minimize taxes.

53
Q

What does the Securities and Exchange Act of 1934 say companies can’t do?

A

They can’t misrepresent or omit material information concerning the operations, sales, and sales trends for the company

54
Q

Which types of earnings management did Sunbeam partake in?

A
  1. Agreement to agree
  2. Channel surfing
  3. Bill-and-hold strategy
55
Q

Why would it be difficult to develop an international code of ethics for business?

A

There are so many different cultures and codes of ethics

56
Q

What are the positive impacts of earnings management?

A
  1. It’s very effective at increasing shareholder value
  2. Higher profit
  3. Higher return
57
Q

What is the negative impact of earnings management?

A

Discovery of earnings manipulation results in stock price drop of 9%

58
Q

What does the Securities and Exchange Act of 1934 require?

A

Material information to be disclosed, but it doesn’t define materiality

59
Q

What does the Foreign Corrupt Practices Act say?

A

US companies can’t pay bribes, even if you’re doing business in another country that allows it

60
Q

What are Al Dunlap’s 4 simple rules for business?

A
  1. Get the right management
  2. Cut back to the lowest cost
  3. Focus on the core business
  4. Get a real strategy

Ethics - Managerial Decision Making (25 decks)

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