Ethical Issues in Business

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2. Ethical Issues in Business. It seems that every day in the news we are hearing of new company that has acted at least unethically and possibly illegally in the operation and financial reporting of their company's business dealings. There are many ethical issues in business. One major issue that we see is over and under reporting net income. Companies like to show that every quarter the net income of the business has an increase or profit. In order to show this they adopt unethical or illegal means in the operation and financial reporting. One such method is the indiscriminate use of stock options for employees that enable companies to take employment costs off balance sheet and inflate earnings. With the recent ethical issues we have had companies over the years it is important that we pay close attention to financial reporting provided by companies. This method will reduce the equilibrium price and increase equilibrium quantity for this company's products and services. The reason for this is that the wage is bill is shown lower than what it actually is. This causes the supply curve to shift to the right. With an increase in supply, if the firm is a monopoly/oligopoly/monopolistic competition, there will be a decline in the price of the product of the firm. In case the firm is operating in perfect competition, there will only be an increase in the quantity the company sells in the market. The scenario described above indicates that there is a shift in the supply curve, in other words the costs are shown to be lower than what they actually are at the time. The supply curve shift to its right but its elasticity is not affected. As the method described above does not relate to demand, the elasticity of demand is not directly affected. Any market structure, perfect, monopoly, oligopoly or monopolistic competition, the same ethical issues arise, the salary cost is underreported because of the use of stock options. This means costs are shown at a lower rate and...
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