Question

It Further CEG Capital Inc. is a large holding company that uses long-term debt extensively to fund its operations. At December 31, the company reported total assets of $100 million, total debt of $55 million, and total equity of $45 million. In January, the company issued $11 billion in long-tem bonds to investors at par value. This was the largest debt issuance in the company's history, and it significantly increased the company's ratio of total debt to total equity. Five days after the debt issuance, CEG filed legal documents to prepare for an additional $50 billion long-term bond issue. As a result of this filing, the price of the $11 billion in bonds that the company issued earlier in the week dropped to 94 because of the increased risk associated with the company's debt. The investors in the original $11 billion bond issuance were not informed of the company's plans to issue additional debt so quickly after the initial bond issue. TIF 11-1 Ethics in Action ETHICS Did CEG Capital act unethically by not disclosing to initial bond investors its immedi- ate plans to issue an additional $50 billion debt offering? TIF 11-2 Team Activity In teams, select a public company that interests you. Obtain the company's most recent annual report on Form 10-K. The Form 10-K is a company's annually required filing with the Securities WORLD and Exchange Commission (SEC) It includo

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Business Ethics: The study which determines what is right and wrong is termed as ethics. The form of applied ethics on ethical problems or principles is called Business Ethics. A business organization should work ethically if they want to survive in market, any unethical act would lead to ruining the image of organization.

The company CE Inc. has taken long term debts to finance its business. It issued bond at par value or face value of $11 billion in January After some days, the company further issued bond at $50 billion of par value. Because of this heavy debt of company, the initial bond price is decreased to 94. And the increasing debt of a company makes it more risky for investors as there is an uncertainty of repaying the loan or debt.

Debt equity ratio of a company is dividing the total debts by the total equity of the company. An increase in this ratio implies that the company has more debts relative to equity and so it is more risky. The investors need to see the ratios to determine the relative efficiency and riskiness of a company The company CE Inc. has acted unethically by not disclosing the additional issuance of additional long term debt of $50 million to the initial bond investors

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