The two retail companies picked are Walmart and Costco whose 2017 Financial statement links are provided below: WALMART https://www.nasdaq.com/symbol/ wmt/financials?query=income- statement COSTCO https://www.nasdaq.com/symbol/ cost/financials?query=income- statement Both organizations are well known brands and position themselves well with their customer base. Walmart’s value proposition is “We save people money so they can live better”. On the other hand, Costco’s value proposition is “All-in-one convenience and everyday affordability”. Both retailers focus on cost saving for their customers. Looking at their financial statements and by analyzing them a few key areas are evident when comparing the two organization. Looking at the current ratio and quick ratio we can determine the short-term solvency of each organization. The current ratio can be determined by dividing the assets by the liabilities. Walmart’s current ratio sits at 0.86 while Costco’s sits at 0.99. The quick ratio is c...
Many people presume that insider trading is always illegal. The term has been associated with scandals and names such as Enron, celebrity businesswoman Martha Stewart, and former Goldman Sachs director Rajat Gupta (Tang, 2017). Legal insider trading happens when directors of the company purchase or sell shares, but they disclose their transactions legally. However, the term “insider trading" is mostly used to describe a practice in which an insider party trades based on non-public material information gained through the performance of the insider’s obligation at the company, in violation of other relationships of faith and assurance or otherwise when the non-public information was stolen from the company. In other words, insider trading is buying, selling or dealing in securities, bonds, and stocks of a company by a director, manager, or employee of the company who has confidential information that is not accessible to the public (LawTeacher, n.d.). There are a variety of ways that insider trading can be conducted: Members of an organization purchasing a security. Employees or members of publicly traded companies are in key positions to access information that would not otherwise be available to the general public. Some of them buy and sell securities based on this information and hope to profit from it when the news is eventually released. Employees are given stock options so there are legal instances where they can purchase shares. However, the rules are complicated and the line is often blurred between what is a legal form of insider trading and what is not. Professionals who do business with the corporation. Bankers, lawyers, paralegals, and brokers are but a few of the consultants who have access to confidential documents of their corporate clients. They may choose to abuse this privilege as an opportunity to make a quick buck through insider trading. Friends, family, and acquaintances of corporate employees. Corporate employees often share information within their own circles that is not shared with Wall Street and the general public. Sometimes these disclosures are made innocently, but other times they are made with the intention of allowing their friends to trade securities with an advantage that other investors would not have. Employees may give these tips to help out a friend in a tough time or they may be asking their friends to pay them a small incentive. Employees may trade through their friends and acquaintances since they are less likely to be scrutinized by the SEC than the employees themselves. Government officials. Officials of different government agencies can gain access to confidential information through the execution of their duties. They may conduct insider trading with this information. Hackers, corporate spies, and other thieves. Clever criminals find a number of ways to gain access to corporate information which they can use to conduct securities fraud. In the Enron case, several managers sold all their Enron stock about an hour before it became public knowledge that the company was not worth as much as everyone thought. Should a manager be punished for acting prudently based on knowledge they have discovered honestly only because the general public does not have that knowledge? To trumpet information without appropriate approval and decision making from the top management is highly unethical and illegal. Hence, a punishable offense to the culprit if and when found guilty. There should be legal boundaries to restrain excesses as well as corrupt practices happening within the firm. Regarding the case of Pete Rose, it is seen as a case of an insider who knows the quality of his team thus taking a bet on their behalf without their consent and k knowledge. The success and failure of his crew were solely dependent on pre-information about the quality of the team as provided by Rose. Although the corporate aspect of insider trading might be considered a legal action, which is likely to exonerate him if he reports his intention within two working days. He ought to be punished for his unethical behavior as his actions are a clear indication of a conflict of interest. Should managers be required to disclose private information they have that might influence the investment decisions of the public? Also, address the question of timing about the dissemination of information: is it enough to share information on a public website or should a formal press conference be required? Yes, managers must disclose information that might influence the investment decision of the public conforming to the rules of SEC, that disclosure should be made public within a space of two working days. A tipster who has understood that he or she has breached trust is liable to be punished as seen in insider trade. Changes in insider holdings are sent to the SEC electronically as a Form 4, which details a company's insider trade or loans (Investopedia, 2017).
References: Legal Insider Trading? This Is What It Is And How It ... (n.d.). Retrieved from http://thehill.com/blogs/ Insider Trading - Investopedia. (n.d.). Retrieved from https://www.investopedia.com/ Insider Trading And Business Ethics - Law Teacher. (n.d.). Retrieved from https://www.lawteacher.net/ What Is Insider Trading & How To Avoid It - Definition ... (n.d.). Retrieved from https://www.moneycrashers.com/ U.S. Securities and Exchange Commission. (2013, Jan 15). Insider Trading. Retrieved from: http://www.sec.gov/answers/ Newkirk, T., Robertson, M. (1998, Sept 19). Speech to SEC Staff: Insider Trading—A U.S. Perspective. Retrieved from: http://www.sec.gov/news/ (2014, Sept 18). What Investors Can Learn from Insider Trading. Investopedia. Retrieved from: http://www.investopedia.com/ |
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