Stanley Case Study

Improved Essays
On what financial goal does Stanley seem to be focusing? Is it a correct goal? Why or why not? There is increasing amount in net profits over the period of five years (2011-2015). It shows that Stanley is focusing on maximizing profits.
This should be the goal of any firm. He should be easily able to maximize the value and also extend the wealth of the stockholders if he continues to maximize profits. The manner in which he decides to employ a software developer also reflects this financial goal.
Wealth maximization requires a long-term prospective, along with consideration of risk and cash flows while profits maximization does not integrate these factors in the management decision process. Therefore, Stanley is using the correct financial
…show more content…
was able to generate enough cash flow to cover their operating expenses and investments in assets.

QUESTION (D)
Analyse the firm’s financial condition in 2015 as it relates to liquidity, activity, debt, profitability and market, using the financial statements provided in Tables 2 & 3 and the ratio data included in Table 5. Be sure to evaluate the firm on both a cross sectional & a time-series basis. Ratio Analysis: Track Software, Inc.
Ratio
Actual
Industry Average 2015
Cross Sectional
Time -Series 2014
…show more content…
has made improvements in its liquidity, debt and profitability ratios but not in its activity ratio. Thus they should make improvement to their activity ratio. It is important that company can convert its credit sales or inventories into cash to improve its cash flows.

QUESTION (E):
What recommendation would you make to Stanley regarding hiring a new software developer? Relate your recommendation to your responses in part a. There are several recommendations for Stanley. Firstly he should not hire a new software developer because it would increase his salaries expenses that lead to lowering his earnings per share. Besides, it will cause him of not capable to pay for a new developer. He should focus more on promoting and marketing his products like converting his inventories into cash. Stanley could also try to minimize his costs in producing output with cheaper cost quality of materials thus his costs of goods can be minimized. Lastly he should try to improve liquidity, activity, debt, profitability and market ratios of his company.

QUESTION

Related Documents

  • Improved Essays

    Most likely, the business owner would want the increase in purchases to outweigh the change in price in a case like this. This is why understanding how to calculate the elasticity and understand the process of it would be important for a potential business…

    • 1180 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    Auctionwire Case Study

    • 827 Words
    • 4 Pages

    5.0 RECOMMENDED SOLUTION, IMPLEMENTATION AND JUSTIFICATION The recommended solution for the problems faced by Auctionwire will be to continue on with the Canauction software. The decision is made on after taking into account various reasons. The primary reason being the financial situation of the company will not allow the building of its software for the time being. Auctionwire will need to stabilize financially before being able to invest in its own software. Building their own particular programming would expand the sensibility of the structure as it is changed to Auctionwire's individual needs yet resources anticipated that would do this viably would be too much.…

    • 827 Words
    • 4 Pages
    Improved Essays
  • Great Essays

    These inadequate invested sums of money are a waste of money. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become cash cow (or stars), or otherwise companies are advised to disinvest. Then they can try to get any possible cash from the Question marks that were not selected. MAIN STEPS OF BCG MATRIX: • Identifying and dividing a company into…

    • 1870 Words
    • 8 Pages
    Great Essays
  • Improved Essays

    Ferreira and Vilela (2004) are of the opinion that cash reduces the pressure to perform well and allows managers to invest in projects that best suit their own interests, but may not be in the shareholders’ best interest. Accordingly, corporate cash holdings are viewed as free cash flows since they can be used by managers to serve their own interests at the expense of shareholders’, thus escalating the conflicts of interest between the two parties (Jensen, 1986; Harford, 1999). Nevertheless, a firm’s cash-holding policy is a subject of managerial discretion, and therefore the level of cash holdings raises concerns when managers do not act in the best interests of shareholders. Therefore, cash holdings are considered as risk-free investments and hence a…

    • 796 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Other problem which Artic PLC has to concern is about the efficiency of the company in convert sales into cash which is lower than its competitors and sector. Operation effectiveness is the key point to improve the company’s performance due to the company is investing in two new capital projects for increase the volume of sales. Moreover, Artic PLC should concern about the external and internal factors which could impact in the viability of the project. If the company follow the suggestion stated in this report they could improve its financial performance and it also has greater chance to succeed with its new…

    • 1314 Words
    • 6 Pages
    Improved Essays
  • Superior Essays

    This will give him competitive advantage to increase the capital. 7. What are the implications for Jones’s lifestyle of accepting the new, larger line of credit? The impact on Jones’ way of work has several components. He cannot for examples increase his net income even though he is the boss if that has direct effect on his possibility to repay loan.…

    • 1799 Words
    • 8 Pages
    Superior Essays
  • Improved Essays

    Sales maximization is a way to benefit from business where the organisation 's main objective is to produce as much income as possible. This means accomplish the maximum potential sales volume, without making a loss. Profit maximization is an objective where the organisation proposes to produce the maximum net income over time. Baumol (1959) build up the “Revenue Maximization Hypothesis”. This theory known as that after a minimum amount of profits has been reached organisation that operate in a monopoly market will aim for sales revenue maximization and not profit maximization.…

    • 702 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    In 2015, it had increased to 5.24% which is above the industry average of 4.30%. This demonstrates that JB Hi-Fi has been consistent in increasingly improving its profitability and maintaining a strong hold over the industry average. The gross profit margin of JB Hi-Fi has consistently maintained over 20% for the past 5 years. It identifies that JB Hi-Fi is consistent in achieving dependable profitability. To further support the profitability of JB Hi-Fi, the return on total assets and asset turnover ratios for 2015 are above industry averages.…

    • 1610 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    Minimum Wage Debate

    • 872 Words
    • 4 Pages

    Entry level workers will be the first to be fired because they are not the source generating high profits. This then leads to further complications such as poverty. Another solution for businesses and companies to prevent profit loss is raising the prices of their goods and services. As previously mentioned, it has been a trend for inflation to rise as the minimum wage increases. If this trend were to continue there would be no significance in raising the minimum wage because people would continue to struggle to afford expenses.…

    • 872 Words
    • 4 Pages
    Improved Essays
  • Decent Essays

    In the reading of Minimum wage and magical thinking he discusses that raising the minimum wage would have a negative impact and would actually hurt those that it is supposed to help and I would agree. Raising the minimum wage would cause inflation to rise, thus basically canceling out what it was intended to do and making the US dollar worth less. Secondly, minimum wage increase would cause the price of goods to rise and then less people will be buying so, then you are paying employees more and making less revenue. Lastly, this would hurt the very people that raising the minimum wage is intended to help because the number of jobs that are entry level or low skilled will drop and then people who were making a 7.25 minimum wage will now be…

    • 810 Words
    • 4 Pages
    Decent Essays