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Integrative Case

Decent Essays

Answer to question no-a a(1). It seems that Track Software LTD. is focusing on mainly in profit maximization rahter than the overall shareholder value maximiaztion. In every year except first two years firm’s pofit has been increased but per share value of the firm dit not increase that much. This is not a right goal for the company. A firms main purpose is to maximize the shareholder wealth not to increase profit. a(2). There is some potential problem exist in the firm. The firm is now mostly managed by the original founder of the firm rather than an independent agent. Though, Stanley believes that if he hires a software developer, firm’s longterm situation will be much better. In the fear of firm’s probable decrease in EPS, …show more content…

d(2) activity ratio
Acitivity ratio also known as asset utilization ratios or operating efficiency ratios. These ratios shows how efficiently firm manages its various assets.

Ratio Name | Firm 2005 | Firm2006 | Industry 2006 | Inventory Turn Over Ratio | 10.40 | 8.12 | 12.45 |

Firm’s Inventory Turn over Ratio has decreased from 2005 to 2006 which is a very bad sign for the firm. In 2006 it was lower than the industry average. A lower inventory turnover ratio than industry average indicates that firm’s product are slow moving than the industries other firms. Technological obsolences or preference of cost estimation package which Track Software Ltd. does not have might be the reason.

Ratio Name | Firm 2005 | Firm 2006 | Industry 2006 | Average Collection Period | 29.6 Days | 35.79 Days | 20.2 Days |

In 2005, Track Software Ltd. took on an average 30 days to convert its credit sales into cash. In the year 2006 it has increasesd to 36 days. Compare to industry average, it has taken 16 days more than other firm in the industry which made its cash difficulties even worse.

Ratio Name | Firm 2005 | Firm 2006 | Industry 2006 | Total Asset Turn Over Ratio | 2.66 | 2.80 | 3.92 |

In the year 2005 for Rs.1 worth of asset firm generated Rs.2.66 worth of sales. In the year 2006 firm’s it has been Rs.2.80. Compare to 2005, it has slightly improved in 2006. In comparison to industry, firm has generated lower sale for each

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