To achieve this, they sewed up deals with fictitious clients.For good measure, profits too were padded up to show healthy margins. Over the years, these ghostly clients understandably never paid their bills, leading to a big hole in Satyam’s balance sheet. The hole was plugged by inflating the debtors (dues from clients) in the balance
Therefore, the financial results were distorted by executives in order to show that the expectations of the top management were met. Toshiba is a publicly traded company and has many local and foreign investors. All the investors invested in Toshiba shares faced with a huge loss of wealth due to around 50% decline in the company share prices. 3. Actions Taken to Recover the Company from the Scandal The actions taken to recover the company from the scandal are given below4: The company’s CEO, Hisao Tanaka, assistant general manager, Norio Sasak and consultant, Atsutoshi Nishida resigned from their jobs.
They started defaulting. When default rate increased because of this, banks realized that they have many homes to be auctioned but the buyers are going away from the market because of rise in interest rate. The process started falling and the banks lost huge amount of money in the process. Now since, securitization is a way by which banks had converted their homes loans into liquid assets, they had no funds left to pay for the securitized assets and they defaulted. Because most of the financial institutions have MBS or mortgage backed security in their portfolio, they started losing heavily on the investments and this propagated to everyone in the system.
Because of such high amount of subprime loans, home owners began to default on their payments impacting the rest of the economy through CDOs. Faulty rating given by agencies such as S & P to these toxic CDOs also contributed. The AAA rating induced a wide variety of investors to invest in these CDOs which multiplied the impact when loan defaults took place. Commodity Futures Modernization Act (2000) was also party responsible as it allowed derivatives (such as CDOs) to be unregulated. SEC raised the leverage limit for investment banks from 12:1 to 30:1 increasing the investment banks'
At the beginning of his creation Costco wholesale as his name indicates it only sales to wholesale business customers so to enter to its shops in the past you need to pay to have a special card to buy in their shops. This with the pass of the time was changing because they notice that they were losing potential retail customers, because they sell big size products and in big quantities and they realized that over the years in the USA the people don’t like anymore the little products they like everything as much bigger as they can, they live in the super-size time, and the customers consume much more. So they decided to maintain the policy of paying a card to buy, but they create different types of cards, not only for business but also for everybody that wants to pay to become a member. But the cards are not the same, there are one card Business membership for the businesses customers and Gold Star Membership for normal customers. The differences are not so much between them, the first one is that the businesses can affiliate other cards and increase the discounts in the products and the gold star not, and the second difference and the most important is that the business can enter to buy during the week one hour before the other customers, the main reason is because the employees of businesses usually wake up early to buy the products to open to the regular hours.
Firstly, the banks hugely increased the market for synthetic CDO’s. This is borderline illegal and should be illegal but isn’t. These were a huge contribution to why the housing market collapsed. Secondly, mortgage brokers are seen giving out multiple million dollar loans to anyone and they were actually targeting people they knew couldn’t afford it. This is illegal and very unethical.
John blunt decided to loan money to buy south sea shares but they were in debt and making insignificant profits it deteriorated the condition of the company. Paradoxically, as the share prices went up, the initial investors sold the stock they had bought at a low price at the “current” price. 2. Blunt increased the dividend share of shareholders and a further increase of this share in the following years. Unrealistic to the population, because the company would have to make gigantic profits.
With the amount of new workers in the industries, harsh laws punished those who were late or absent to work or didn’t meet company quotas. In some extreme cases these crimes were punished with execution. Managers were responsible for meeting targets and if they failed to do so they too could face death sentences. The focus on heavy industry and arms saw that workers lacked basic consumer goods such as clothes and shoes. The disregard for human well-being left the Soviet economy unbalanced, and once again they were behind their competitors in the West, who now had focuses on consumer based goods and services (Harris, 2013).
Gupta believed that people less competent and qualified than him were making big money and hence, he took the plunge and violated the norms laid out by Securities and Exchange Commission (SEC) of the U.S.3 The above case clearly explains the Principal-Agent problem that leads to inefficiency in performance of international markets. The Agent in this case was Rajat Gupta, who had an incentive to make quick money and thus, by passed the legalities and sold off critical information about the Principal i.e Shareholders of Goldman Sachs to an outsider. Had there not been this conflict of interests between the Principal and Agent, Gupta would never have committed this
The financial irregularities revealed by the firm's founder, were trailed by other assertions, such as that Satyam executives raised employee counts, siphoned off money and fled the country. Mercurial economics In every industry, although cost production improvements occur, few do the underlying economics move as fast as they do in IT. For example, as given by James J. Tucker et al., a mainframe that cost a million dollar in 1965 costs less than $30,000 today and may cost 20% to 30% later which complicates the decision makers to evaluate costs of outsourcing bids. Less flexibility The outsourcing vendor offers the level of IT services mentioned in the contract using the technological platform it considers appropriate. James J. Tucker says that one may get locked in unless specifically spelled out in the contract; a firm may lose the pliability of shifting to new computing platforms.