Analysis Paper

Being a financial planner of Ajax Inc, Marcus has to make the decisions to recommend a proposal that could help the firm raise enough funds to fulfill the temporarily increased demand on working capital. He has two options, one is that he quietly delays the payment of Ajax’s account payable by four additional days on average, this option has no effect on Ajax’s financial statements but may hurt its suppliers. The other one is to raise funds in a common manner like borrowing from its banks or other financial institutions, or collateralizing any of its assets, but this will make its financial statement look worse.

Stakeholder Analysis

Stockholders of Ajax: They may prefer delaying the payment because it has no effect on Ajax’s financial statements and they would not take any risk on losing in the public equity market.

Suppliers of Ajax: They may prefer borrowing money because delaying payment may lead them to face the same situation as Ajax especially this action is quiet.

Marcus Brown: He is employed by Ajax, so if the stockholders of Ajax are happy with his proposal, he can get good prospect in his career. Thereby, he would prefer delaying the payments.

Decision

Delaying Payment Borrowing money

Stakeholders

Stockholders + -

Suppliers - +

Marcus Brown + -

Section 2

Utilitarianism

Utilitarianism is an ethical theory which determines the right and the wrong by focusing on the consequences. It is primarily a consequentialism. Based on the outcomes it chooses one course of action over others. It moves beyond one’s own interest and considers the interests of others. According to utilitarianism, the actions are right if they promote happiness overall, and wrong if they reverse the happiness and become the cause of unhappiness. We have analysis the influence on each stakeholder for each option. According to the stakeholder analysis table, we find that the first option which is delaying payment has 3 plusses and 2 minuses, for a net of plus 1, and the second option which is borrowing money has 1 plus and 2 minuses, for a net of minus 1. So, from a utilitarian perspective, delaying payment is more ethical because it promotes happiness both for stockholders of Ajax and Marcus Brown, generate more happiness than borrowing money.

Profit Maximization

The ultimate goal of a company is to increase profits, because company is always belonging to stockholders, it has the primary obligation to maximize stockholders’ interest. In a real world, we can grow profit in different manners, it is imperative to grow profits ethically. According to the stakeholder analysis, delaying the payment is good for Ajax and bad for Ajax’s suppliers, and the second option is good for Ajax’s suppliers and bad for Ajax. From a traditional profit maximization perspective, we may easily conclude that the delaying payment is better than borrowing money. However, some theories indicate that in the long run, only a company with good reputation and social responsibility can make profit maximization. If Ajax choose to delay payments, it may lose its reputations among suppliers and cannot take any advantage of its trade credit in the future. Therefore, borrowing money is better than delaying payments in the long run.

Universalism

Universalism is another philosophical concept based on the notions with universal applicability. They believe in universal principles of religion, conceding others in universal manners. It is basically a Christian theology. From a universal point of view delaying the payment of the suppliers beyond the deadline is not good and ethically wrong. Because we universally believe that hurting others is not ethical, especially we are the decision maker. On the other hand, borrowing money is a common manner to handle this scenario for a company. Hence, from a universal perspective, borrowing money is more ethical.

Section 3

Both options have their own pros and cons. If we delve into them, we will see that delaying payment is not an ethical course of action compare to borrowing money, it is violating both perspectives of profit maximization and universalism and only utilitarianism perspective support it. Conversely, borrowing money is ethical in perspective of universalism and beneficial for the company in the long run apply to perspective of profit maximization. Although from perspective of utilitarianism, it is not a good choice, I believe the main reason that lead to this conclusion is the consideration of Marcus. For him, he has no interest on the suppliers of Ajax, so he will get benefit from suggesting a proposal that good for his company. If I was Marcus, I would decide to suggest borrowing money because I believe my personal interest should not be against the society’s interest, and an ethical company plays an important role in the society, I would choose the option that apply to the universalism.