MGT120H5 Chapter 2: Chapter2CDEthical Issue 1
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MGT120H5 Full Course Notes
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Transaction to record land transfer and issue of shares. Transaction to cancel shares and transfer land back to murphy. Murphy, the business will receive loan based on value of shareholder equity. Friend who invested in business could increase value of investment business expands. This option would be ethical in the circumstances. builds if. No, if the intent is to transfer the land back to the shareholder during term of the loan. Murphy, owner of the business will violate bank covenant when land is transferred back to personal use and common shares are cancelled during term of loan. Bank risk on loan is increased as assets were overstated on loan application. Loan officer could be held accountable for bad risk loan.
