American Home Products Corp. Case Analysis Essay

When a law enforcement officer or other public employee is accused of potentially criminal conduct, they may face three different kinds of interviews or interrogations. If an officer is interviewed as a criminal suspect, they have the absolute right to decline to answer any questions, or to insist that they have a lawyer of their choosing to attend the interview. The first is type is during a criminal investigation; the second is during a disciplinary investigation and finally during the course of civil litigation where there has been damages. During a criminal interview, there is no professional, ethical or moral duty to participate especially without the assistance of an attorney to represent the officer under investigation. It has come to a surprise that many experienced officers will waive their right to silence and give the investigators an audio recorded statement. Some of the inexperienced criminals do not make incriminating statements. The motive for cooperation is to avoid unfavorable publicity.

3) The interest resulting from the debt also will cost to the company even it is taxable. The interest is fixed base on the level of the debt even the company does not generate profit. This would need to be careful when take on the debt comparing to use its own capital. And the creditor may come to intervene on the business when the company has difficulty to service its debt.

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

In general, the lower the company's reliance on debt for asset formation, the less risky the company is since excessive debt can lead to a very heavy interest and principal repayment burden. This is demonstrated through statistics such as high financial risk, low interest coverage ratios, and high debt ratios. However, when a company chooses to forgo debt and rely largely on equity, as in the case of AHP, the company does so at the expense of a tax reduction effect supplied by interest payments. Thus, a company has to consider both risk and tax issues when deciding on an optimal debt ratio.

Present value of debt tax shield at a corporate tax rate of 35% ($ m)

The fur trading industry played a major role in the development of the United States and Canada for more than 300 years. The fur trade began in the 1500's as an exchange between Indians and Europeans. The Indians traded furs for such goods as tools and weapons. Beaver fur, which was used in Europe to make felt hats, became the most valuable of these furs. The fur trade prospered until the mid-1800, when fur-bearing animals became scarce and silk hats became more popular than felt hats made with beaver. Traders and trappers explored much of North America in search of fur. They built trading posts in the wilderness, and settlements grew up around many of these posts. Some of these settlements later became such major cities as Detroit, New Orleans, and St. Louis in the United States; and Edmonton, Montreal, Quebec, and Winnipeg in Canada.

* unity of purpose and focus under a common corporate strategy (further supporting the firm’s strategy as it relates to acquisitions and divestitures);

Jon Fries was the President, CEO, and managing director of F&C international, Inc. He was in charge of the total management of the company. The key responsibilities of Jon Fries were to align the company, internally and externally, with his strategic vision. His duties were to facilitate business outside of the company while guiding employees and other executive officers towards a central objective. As a CEO, Jon Fries had high interaction with F&C`s independent auditors, but he misguided them by creating false documents, mislabeling inventory, and undercutting the

How should Ben & Jerry’s management improve its management control processes in order for it to be more competitive in the superpremium ice cream industry?

The advantage of debt financing is that interests paid on such debt are tax deductible. If a company has the intention of maintaining a permanent debt, the present value of the tax shield can be obtained by discounting them by the expected rate of return demanded by the investors who hold the debt (this is a perpetuity, where in reality would be the maximum possible present value for the tax shield). This tax shield value reduces the tax bill and increases the cash payment to investors, increasing the value of their investments.

In addition, as we are comparing the profit margin and operating profit margin, we notice that interest expense, from 2006 to 2010, consumed a relative small portion of sales proceeds comparing to 2011. In 2011, the profit margin for HH is -1.46% and the operating profit margin for HH is -0.74%. Since profit margin includes interest expense in the calculation while operating profit margin does not, we can conclude that HH has about the same amount in interest expense as the amount of operating loss before interest. This finally doubles the amount of company’s loss at the end of the cycle. This big amount of interest expense leads us to study HH’s leverage ratios.

In order to maintain its credit rating, Diageo’s Treasury team recommends an interest coverage of 5x to 8x, but the simulation-based model calculated an optimal interest coverage.  Figure 2 shows minimal cost corresponding with an interest coverage of approximately 4.2.  Shown in the gray bars, the cost of taxes paid decreases as EBIT/Interest

Webster dictionary defines ethics as the discipline of dealing with what is good or bad and with moral duty and obligation. It also defines moral as principals of right and wrong behavior. For research purposes, Ferrell, Fraedrich, Ferrell (2008) defines business ethics as the principles, values, and standards that guide behavior in the world of business. Hayes Homes & Realty, Inc is a local real-estate company that tries to abide with all the rules to make sure they are considered a company that has good business ethics. The policy and procedures manual addresses all of the ethical issues that Ferrell, Fraedrich, Ferrell (2008) chapter three. Let’s look at how Hayes Homes & Realty, Inc. recognizes ethical issues, how the ideas of the philosophies are used in their businesses, and how they punish those who don’t follow the rules of the MAAR, NAR, and the company itself.

Although the increased leverage decreases the amount of earnings available to stock holders from 496.9 million to 451.7 million for a total of 45.2 million dollars, it has a positive affect for the company’s tax structure. It actually reduces the company’s tax liability by 83 million dollars! Without the debt they have to pay 952.5 million dollars in taxes. However after an increase of 30% leverage, the new tax liability is 869.5 million dollars.

Leveraging the company would affect taxes because interest is tax deductible. Therefore, the more debt American Home Produces takes on, the less the company will have to pay in taxes. Also, when leveraging up there is tax savings the company will receive due to the interest tax shield.