JJ's Wool Company is considering purchasing 48% of shares in Hunter Cotton Ltd - HSC - SSCE Business Studies - Question 20 - 2005 - Paper 1
Question 20
JJ's Wool Company is considering purchasing 48% of shares in Hunter Cotton Ltd. Audited accounts show that the plant and equipment of Hunter Cotton Ltd are under-val... show full transcript
Worked Solution & Example Answer:JJ's Wool Company is considering purchasing 48% of shares in Hunter Cotton Ltd - HSC - SSCE Business Studies - Question 20 - 2005 - Paper 1
Step 1
Asset stripping and corporate raiding
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Answer
JJ's Wool Company should consider asset stripping and corporate raiding as ethical aspects. Asset stripping refers to the practice of purchasing a company and selling its assets for profit, which may undermine the operational viability of Hunter Cotton Ltd. Moreover, corporate raiding involves acquiring a significant stake in a company with the intent of instigating changes that primarily benefit the purchaser, potentially at the cost of the company's long-term stability and stakeholder interests.