BUL 6810 Final Examination

BUL 6810
Final Examination
INSTRUCTIONS
The final examination consists of 4 essay questions; each question is worth 25 points. Each
question and any subparts of the question must be answered. The final should be 6-8 pages,
double spaced and only 1 inch margins, please. The answer may exceed the page limitations.
This is not a group project. Each student should work alone. READ THE QUESTIONS
CAREFULLY BEFORE ANSWERING.
In order to do well on this test you must refer to materials in the chapters, including cases,
and you may also refer to the handouts and in-class case studies and discussions. Make sure
to use the legal and business terms that you have learned in the course and apply them to the
facts of the questions. When you use a legal term, provide an explanation of its meaning
and/or any legal test that explains how it is applied to any factual situation. If there is a
case that supports your argument, make sure to explain the reasons.
Please turn in your exam in dropbox. LATE SUBMISSIONS WILL NOT BE ACCEPTED.
NO EXCEPTIONS!
1. Using the course readings and materials, explain how legitimate accounting methods
facilitate fraud. Give examples.
2. Explain what Arthur Leavitt meant by the “erosion” of the quality of financial reporting.
Give examples.
3. The South Miami Engineering Company of Florida (SMEC) recently began marketing a unique
test that can predict what the stability of soil will be during a flood. This test benefits property
owners because it allows them to determine whether a building will be structurally stable in flood
conditions. No one else performs this test in Florida. SMEC did not invent the test, but instead
purchased the rights to a license for the entire geographical area of south Florida from a vendor.

SMEC hired and trained Xavier, an experienced engineer, to perform this test. SMEC
provided Xavier an employment contract for Xavier to sign. The contract contained the
following non-competition clause:
“In the event Xavier leaves the employ of SMEC, he agrees not to perform or provide
similar testing services within the State of Florida for six years. Xavier read and signed
the agreement. After one year, Xavier quit work at SMEC and opened up his own
engineering company. His company provided engineering services, including a test very
similar to the one performed by SMEC. The test was not developed from any information
gained during Xavier’s employment at SMEC. Instead, one of SMEC’s competitors
developed a different prototype of the test and licensed its use to Zavier’s company.
SMEC’s sales declined after Xavier’s company began performing the similar test.

When SMEC learned that Xavier had opened his own engineering firm and was
performing a similar test, it sued Xavier for breach of the noncompetition clause.
a. Is the non-competition provision between SMEC and Xavier enforceable? Explain.
(Florida courts will rarely refuse to enforce a non-compete agreement due to its length
or geographic scope. Instead, courts often employ the "blue pencil" to reign
impermissibly broad terms within the limits of Fla. Stat. § 542.335) See, final exam
attachment.
b. Assuming the non-competition provision is enforceable and was breached by Xavier,
what types of damages might SMEC be entitled to?
4. A development company has decided to raise capital from private investors to build strip
shopping malls in three separate towns in south Florida. Your consulting firm has been
retained to advise the company on the form of business organization to be used to
facilitate the transaction. The development company wants to keep the three investments
separate. It is not intended that profits be shared between investor groups. The
investment transactions should be wound up and terminated within 90 days after the
completion of the construction. Investors will receive the return of their investment with
an additional 6% return on investment. What form of business organization would you
recommend and why?