Case Study of La Posta Mexican Restaurants, Inc.

Question 1: How important do you think cindy’s information and rating would be for institutional
investors? What would be its impact on stock prices?
Cindy’s financial analysis of La Posta will cause the institutional investors to curtail their purchase of La
Posta’s share as they primarily deal in stock that experience decline in short term rather that long-term
decline in the value that is expected in the stock of La Posta. The ratings provided by Cindy will cause the
institutional investor’s investment in La Posta to decline this will offset a chain reaction, as a lot of
individual investors follow the purchasing patterns of institutional investors thus, they will also stop
buying La Posta’s share as well. This will increase the supply of its share in the market thus, decreasing
the Price of La Posta’s share even further.
Question 2: Who are the stakeholders of Cindy’s information?
Cindy is a financial analyst whose well respected in the industry for her work. All of individuals and
institutions consider her reports to be valid and just. The primary stakeholders of Cindy’s information are
the institutional investors, individual investors, La Posta itself, general public, the underwriting firm all
are affected by Cindy’s analysis of the firm.
Question 3: What obligation should Cindy feel toward the institutional investors? Retail
customers?
Cindy has an ethical and moral obligation to make a true analysis of the restaurant future financial
performance. If Cindy modified her analysis to appease her Bosses and the restaurant owners she’ll be
misleading the investors into buying the share when the firms profitability is expected to decline in the
short run. This may translate into losses for the investors, thus, Cindy is obligated to share the true
analysis of the restaurant’s performance.
Question 4: should Cindy write her report to reflect the wishes of her boss and other executives in
Dillon Sutton?
The modification of the report to suit the wishes of her boss and firms other executives, she will be
benefiting them at the expense of the investors. She being aware of the actual financial situation of the
firm will be behaving in a morally corrupt manner by keeping the investors in the dark about it. However,
if she was honest in her report about the firms future expected performance she’ll be jeopardizing her
position in the firm. But, if she doesn’t when the information eventually comes to light she’ll lose her
reputation in the industry as well as her credibility.
I believe Cindy should share her actual analysis of the firm since, even if she lost her position in the firm
she’ll have her reputation and credibility to support her career.
Question 5: How would you handle this situation if you were Cindy?
If I were to be in Cindy’s place I would make an honest report on the company’s expected financial
performance. Because even if I were to jeopardize my position in the firm I will have a clean conscious
and a stellar reputation to back my career. Since, Cindy has a well established reputation as making an
accurate forecast of firms performance. She will recover from this set back very quickly.