Kat Keiser is the president and principal stockholder of Kat's Kupcakery, Inc. The business is applying for a $100,000 bank loan for expansion. Keiser believes she is more likely to get approved for the loan if the business’s balance sheet looks good. She is considering the following options for improving the owner's equity of the business in order to obtain the loan:
1. Issue $50,000 of common stock in exchange for cash to a friend who is interested in investing in the company. This would increase assets (cash) by $50,000 and increase owner's equity by $50,000.

or
2. Transfer $50,000 of Keiser's personal land to the business and issue common stock to herself. After the loan is obtained, Keiser will transfer the land back to herself and zero out the common stock. This would temporarily increase assets (land) by $50,000 and increase owner's equity by $50,000.

Discuss the ethical issue in this case. Analyze the alternatives from an ethical and a business point of view. Who are the stakeholders? What are the consequences? What would you do?

The ethical issue in this case is she is willing to manipulate her finances in order to obtain a loan for $100,000. This is an ethical issue also very dishonest.
Even though Kat will use dishonesty to apply for this $100K loan, there are advantages borrowing money from the bank. You will be charged interest when you go through a lender, however, they will not tell you how to run your business. The bank won’t have right to any of Kat’s profits; the only thing Kat has to do is repay the loan on time. Another possible advantage when borrowing from a lender is as a business owner you can sometimes write off the interest as a business expense. For the business standpoint, borrowing money from a lender can be beneficial if everything else lines up. Before Kat adjusts her balance sheet, she needs to seek professional