ACCOUNTING-International Network Solutions • LO19–6

International Network Solutions
• LO19–6
International Network Solutions provides products and
services related to remote access networking. The company has grown rapidly
during its first 10 years of operations. As its segment of the industry has
begun to mature, though, the fast growth of previous years has begun to slow.
In fact, this year revenues and profits are roughly the same as last year.
One morning, nine weeks before the close of the fiscal year,
Rob Mashburn, CFO, and Jessica Lane, controller, were sharing coffee and ideas
in Lane’s office.
Lane: About the Board meeting Thursday. You may be right.
This may be the time to suggest a share buyback program.
Mashburn: To begin this year, you mean?
Lane: Right! I know Barber will be lobbying to use the funds
for our European expansion. She’s probably right about the best use of our
funds, but we can always issue more notes next year. Right now, we need a quick
fix for our EPS numbers.
Mashburn: Our shareholders are accustomed to increases every
year.
Required:
1.How will a buyback of shares provide a “quick fix” for
EPS?
2.Is the proposal ethical?
3.Who would be affected if the proposal is implemented?