2) Swice Good Doggies, Inc. develops and manufactures reallyneat meat products. The company has been growing rapidly during thepast 10 years, due primarily to having discovered, patented, andsuccessfully marketed dozens of new products. Profits haveincreased annually by 30% or more. The company pays no dividendsbut has a very high price-earnings ratio. Due to its rapid growthand large expenditures for research and development, the companyhas experienced occasional cash shortages. To solve this problem,the president of the company (Myer Winter) has decided to improveits cash position by (1) requiring customers to pay for productspurchased on account from the company in 30 days instead of 60 daysand (2) reducing expenditures for research and development by 25%.Evaluate this situation from the perspective of a) Short-termcreditors and b) Common stockholders.
2) Swice Good Doggies, Inc. develops and manufactures reallyneat meat products. The company has been growing rapidly during thepast 10 years, due primarily to having discovered, patented, andsuccessfully marketed dozens of new products. Profits haveincreased annually by 30% or more. The company pays no dividendsbut has a very high price-earnings ratio. Due to its rapid growthand large expenditures for research and development, the companyhas experienced occasional cash shortages. To solve this problem,the president of the company (Myer Winter) has decided to improveits cash position by (1) requiring customers to pay for productspurchased on account from the company in 30 days instead of 60 daysand (2) reducing expenditures for research and development by 25%.Evaluate this situation from the perspective of a) Short-termcreditors and b) Common stockholders.
