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Essay / Research Paper Abstract
This 3 page paper looks at an article from the Wall Street Journal concerning the way Krispy Kreme are undertaking questionable accounting practices that may be motivated by the desire to support share prices. The paper outlines the problem, identifies the relevant factors and then considers some solutions to the problem. The bibliography cites 5 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEkrispyacct.rtf
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Unformatted sample text from the term paper:
expand and has a front loaded profit due to the way in which the majority of profit comes from the setting up of new stores with the initial fees and
highly profitable equipment sales (Brooks and Maremont, 2004). This model, which is reaching maturity, and as such is reaching point of declining returns (Nellis and Parker, 2000). This is seen
the level of new stores opening fall, and as a result the profits of Krispy Kreme are falling. When profits are falling share prices also fall. In the short
term capitalistic stock markets there is pressure from the shareholders to keep the prices of shares high, and when there are also large shareholdings by the board members, in this
case Mr Livengood, the CEO has 1.4 million shares, although of these 1.3 are in the form of options, that he has not yet sold, in the past he had
sold 853,000 shares for $32 million, the pressure to keep the price up may be seen as even more intense (Brooks and Maremont, 2004). The company has undertaken some action
which may be seen as very questionable ethically in order to help the accounts appear more profitable that is actually the case and give an appearance of a sounder and
more asset backed company. The first is with the repurchase of some franchises, for a price many see as far too high, 85% of the value of the repurchased franchises
were then places into a new asset group called "reacquired franchise rights" (Brooks and Maremont, 2004). This is an intangible asset and is not a class that needed to be
amortised (Brooks and Maremont, 2004). The student should also note that in repurchasing these stores at a price well over the usual market rate to former board members this has
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