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