“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved.”
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If it were you, what would you do?
When faced with the devil and the deep blue sea, would you rather jump into the sea or dance to the devil’s music?
Questions like this might arise when Accountants find themselves in seemingly difficult situations. The scenario below illustrates such. Your comments are highly welcome.
Imagine that you are the Chief Financial Officer (CFO) of a Small and Medium Enterprise (SME). It is April and the Chief Executive Officer has just returned from a meeting with the company’s bankers. She calls you to her office to discuss the results of the negotiations. As things stand, the company requires a fairly significant injection of capital which would be used to modernize plant and equipment. The company has been promised new orders if it can produce goods to an international standard. Existing machinery is incapable of manufacturing to the required level of quality.
Whilst the bank is sympathetic, current lending policies require borrowers to provide an adequate current and projected cash flow, as well as a level of profitability sufficient to indicate a capacity to make repayments from an early date. Largely because of some industrial problems, the business has not been performing at its optimal level. As such, the figures would not satisfy the bank’s requirements.
However, the Chief Executive Officer (CEO) informs you that she has told the bank that the company is in excellent shape; that she believed that its financial results would satisfy the criteria and; that the Chief Financial Officer could deliver the company’s financial report to the bank at the beginning of the following week. She adds, “It is up to you to decide on the contents of the report”. As you were getting up to leave her office, she mentioned casually that the company would have no choice but to retrench if the company fails to secure the bank loan required to modernize its plant and equipment. Understandably, you find the possibility of being retrenched very scary as you have just purchased a new house, with a significant mortgage.
As the Chief Financial Officer, what decision would you make with regard to the request of the Chief Executive Officer?