Question

In: Accounting

You are a designated accountant (CPA) working as the Controller for Orion Enterprises, a widely diversified...

You are a designated accountant (CPA) working as the Controller for Orion Enterprises, a widely diversified company. As many publicly-traded companies do, Orion requires its senior managers to own shares in the company, as a condition of your employment.In your role as Controller, you are as a matter of course knowledgeable about the company’s performance, both forecast and actual. This morning, your senior accounting clerk prepared the draft financial statements for the current quarter. The preliminary net income for the quarter looks like it will be substantially larger than had been previously forecast. Because of this, you anticipate that the share price of the company will rise considerably when the quarterly results are released to the public.

Should you buy more shares in Orion Enterprises before the quarterly results are released to the public and the price increases? Provide at least four reasons for your action.

Solutions

Expert Solution

As it is mentioned in the question that according to the company's conditions it is compulsory that its employees must hold a share in the company. So we assume it that way. So I must buy some shares in the Co.Orion Enterprises. So the question here is "Should I buy more shares in the company before the quarterly results are releasesd to the public?"

The answer is YES, because the reasons are:

1 . It is according to the company's terms and conditions

2 . Since it is a benefit or you can call it as Employee Stock Option Scheme(ESOP), you can buy shares at nominal rate and you can sell it later for premium/gains

2 . Since you are Designated Accountant(CPA) , you will be knowing about the company's recent performances and future forecasts , so you can assess whether the prepared financial statements is true or not . Statement indicates a positive net income . So you can buy

3 . Since the net income indicate increased growth than the expected the share price will definitely go up

4 . And definitely the substantial growth of net income indicates the growth of the company too , So its always better to be shareholder of the good company than being just a employee

I hope I have satisfied you with my answer. I have put my full efforts in answering this question. Please support me by giving positive ratings

ekkarill92 answered 1 year ago
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