A group of angry shareholders has placed a corporate resolution before all share

Question

A group of angry shareholders has placed a corporate resolution before all shareholders at a companys annual stockholders meeting. The resolution demands that the company stretch its accounts payable, because these shareholders have determined that all of the companys competitors do so, and the firm operates in a
a highly competitive industry.
a. how can management at the annual stockholders meeting defend the firms practive of paying on time?
b. what benefits maight the company receive from suppliers for paying on time?
c. If the company began a practive of stretching its accounts payable, would the benefit received be a one time or recurring benefit?

Explanation / Answer

A group of angry shareholders has placed a corporate resolution before all shareholders at a companys annual stockholders meeting. The resolution demands that the company stretch its accounts payable, because these shareholders have determined that all of the companys competitors do so, and the firm operates in a highly competitive industry.

a. how can management at the annual stockholders meeting defend the firms practive of paying on time?

In quite a few ways! Depending on the firm's relationship with its shareholders, shareholders can use their voting rights in the firm (in the form of a financial stake - aka stock ownership) to do anything from firing the CEO to selling all of their stocks simultaneously, the latter thereby bankrupting the firm.

b. what benefits maight the company receive from suppliers for paying on time?

If suppliers pay on time, the company's credit and general financial reliability increases. Because the firm is perceived as more reliable, more people will be willing to invest in it, and hence it will have an easier time raising capital when needed.

c. If the company began a practive of stretching its accounts payable, would the benefit received be a one time or recurring benefit?

The benefit would be one-time, because there is always going to be a limit to maximum stretching. Once that limit is reached, the company can not push beyond that limit to earn further benefits.

I hope that you found this answer useful towards your studies. It took a considerable amount of thought, time, and effort to compose, and and I'd sincerely appreciate a lifesaver rating! It would really make my day! :)

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