R. J. Reynolds Tobacco Co

Introduction

This paper bequeath review the R. J. Reynolds Tobacco Company field study found in the 2nd edition of chronicle for Managers: Texts and Cases. The primary accounting issue in this case is revenue recognition and questions relating to trade loading will be discussed and evaluated. An historic set of non-accounting issues will also be presented that relate to potential unethical behavior that occurred during the leveraged buy give away (LBO). Based on the facts presented, the paper will conclude by developing a plan of serve R. J. Reynolds Tobacco Company (RJRT) could potentially take to improve their trade standing to gain a competitive advantage.

Background

In the wake of events of glowering Monday, the October 1987 stock market crash, the growing anti-smoking sentiment and the highly publicise tobacco litigation beginning to take place; RJR Nabiscos chief executive officer F. Ross Johnson was looking for a way to raise their languishing stock price. compensate though profits and sales were up, he still treasured to component the benefits of the company with the shareholders. The CEO is also concerned with the radioactive dust he may receive from the board when they find out about the imminent failure of the 350 million dollar smoke-free cigarette they are hoping will be a success which would boost the share price.



(Burrough &type A; Helyar, 1990)

In October 1988, Johnson approached the board with the idea of a management led buyout of the company at $75 per share for a total value of $17 billion. In reception to Johnsons idea, a special committee was formed to discuss putting RJR Nabisco up for auction. A bidding war ensued, and Shearson Lehman Hutton lost to Kohlberg Kravis Roberts & Co. (KKR) with a winning bid of $109 per share, $25 billion. While Kravis and Roberts of the KKR impregnable became famous for...

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