Computer Associates International, Ic., the world's leading business software company, delivers the end-to-end infrastructure to enable e-business through innovative technology, services, and education. Recently, Computer Associates had 19,000 employees worldwide and revenue of over $6 billion. The following information is from the company's annual report. Computer Associates International, Inc. Management Discussion The Company has experienced a pattern of business whereby revenue for its third and fourth fiscal quarters reflects an increase over fırst- and second-quarter revenue. The Company attributes this increase to clients' increased spending at the end of their calendar year budgetary periods and the culmination of its annual sales plan. Since the Company's costs do not increase proportionately with the third- and fourth-quarters' increase in revenue, the higher revenue in these quarters results in greater profit margins and income. Fourth-quarter profitability is traditionally affected by significant new hiring, training, and education expenditures for the succeeding year. Instructions 1. Why don't the company's costs increase proportionately as the revenues increase in the third and fourth quarters? 2. What type of budgeting seems appropriate for the Computer Associates situation?
Computer Associates International, Ic., the world's leading business software company, delivers the end-to-end infrastructure to enable e-business through innovative technology, services, and education. Recently, Computer Associates had 19,000 employees worldwide and revenue of over $6 billion. The following information is from the company's annual report. Computer Associates International, Inc. Management Discussion The Company has experienced a pattern of business whereby revenue for its third and fourth fiscal quarters reflects an increase over fırst- and second-quarter revenue. The Company attributes this increase to clients' increased spending at the end of their calendar year budgetary periods and the culmination of its annual sales plan. Since the Company's costs do not increase proportionately with the third- and fourth-quarters' increase in revenue, the higher revenue in these quarters results in greater profit margins and income. Fourth-quarter profitability is traditionally affected by significant new hiring, training, and education expenditures for the succeeding year. Instructions 1. Why don't the company's costs increase proportionately as the revenues increase in the third and fourth quarters? 2. What type of budgeting seems appropriate for the Computer Associates situation?
Chapter12: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 7P
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Transcribed Image Text:Computer Associates International, Inc., the world's leading business software company, delivers the end-to-end infrastructure to enable e-business through innovative technology,
services, and education. Recently, Computer Associates had 19,000 employees worldwide and revenue of over $6 billion.
The following information is from the company's annual report.
Computer Associates International, Inc.
Management Discussion
The Company has experienced a pattern of business whereby revenue for its third and fourth fiscal quarters reflects an increase over fırst- and second-quarter revenue. The Company
attributes this increase to clients' increased spending at the end of their calendar year budgetary periods and the culmination of its annual sales plan. Since the Company's costs do not
increase proportionately with the third- and fourth-quarters' increase in revenue, the higher revenue in these quarters results in greater profit margins and income. Fourth-quarter
profitability is traditionally affected by significant new hiring, training, and education expenditures for the succeeding year.
Instructions
1. Why don't the company's costs increase proportionately as the revenues increase in the third and fourth quarters?
2. What type of budgeting seems appropriate for the Computer Associates situation?
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