Reference no: EM132523628

Point 1: "Business Solutions Ltd, a developer and distributor of business applications software, has been in business for five years. The company's main products include software programs used for sales management and customer invoicing. Sales have increased steadily to the current level of $15 million per year, and the company has 250 employees.

Point 2: Sarah Smith joined Business Solutions Ltd approximately one year ago as accounting manager. Her duties include supervision of the company's accounting team and preparation of the company's financial statements. She has noticed that, in the past six months, the company's sales have ceased to rise and have actually declined in the two most recent months. This unexpected downturn has resulted in cash shortages. Compounding these problems, Business Solutions Ltd has had to postpone the introduction of a new product line because one of its suppliers, Print Design Ltd, has not yet delivered the instruction manuals for the new product.

Point 3: Business Solutions Ltd contracts most of its printing requirements to Print Design Ltd, a small company owned by Martin Macdonald. Macdonald has dedicated a major portion of his printing capacity to Business Solutions Ltd's requirements, because its contracts represent approximately 50 per cent of Print Design Ltd's business. Sarah Smith has known Macdonald for many years, and it was Macdonald who first told Sarah that Business Solutions Ltd needed a new accounting manager.

Point 4: While preparing the company's most recent financial statements, Smith became concerned about its ability to maintain timely payments to its suppliers. She estimated that payments to all suppliers, which were usually made within 30 days, were now exceeding 70 days. Smith is particularly concerned about payments to Print Design Ltd. She knows that Business Solutions Ltd has recently placed a large order with Print Design Ltd for printing the new product instruction manuals, and that Print Design Ltd will soon be placing an order with its suppliers for the special paper needed for this new job. Smith is considering telling Macdonald about the cash problems of Business Solutions Ltd, although she is aware that a delay in the printing of the documentation would jeopardise the company's new product."

Question 1: Assume that Sarah Smith learns that Martin Macdonald of Print Design Ltd has decided to postpone the order of the special paper needed for the Business Solutions Ltd's printing job; Smith believes that Macdonald must have heard rumours about the company's financial problems from some other source, because she has not talked to Macdonald. Should Sarah Smith tell Business Solutions Ltd's managers that Macdonald has postponed the special paper order? Please Explain your answer.