Track Software Inc. Essay Example for Free

Track Software Inc. Essay1.) Stanleys financial design he seems to be focusing on is maximizing makes. This is the correct goal be travail the goal of any sure and therefore its financial manager, should be to maximize its value and by extension the wealth of the shareholders. 2.) on that point is electric potential for an function problem if Stanley decides to go ahead and invest in the software developer. This investment will cause a temporary decrease in the earnings per share of the firm which will mean fewer earnings at the present time for the stakeholders. This may be a problem if the goal of the shareholders is to contact money sooner than later. Since, the goal of the shareholders is simply to maximize wealth, there may not be an agency problem since the goal of the financial manager, Stanley, is the same as the shareholders. B. Since there is no preferred stock compensation available for common stockholders Net profit after taxes. No of shares of common stock outstanding = 50,000 salary per share = ______Net profit after taxes____________ No. of shares of common stock outstandingEPS show a poise increase over the past five years indicating that Stanley is achieving his goal of maximizing profits. C. Operating Cash move (OCF) for 2012OCF = Earnings before Interest and Taxes (1 Tax rate) + Depreciation OCF= EBIT (1 T) + Depreciation= $89 000 (1 0.20) + $11 000= $82 two hundredFree Cash Flow (FCF) for 2012FCF = OCF1 Net Fixed Assets Investments Net Current Assets Investment FCF= OCF NFAI NCAINFAI = Change in net fixed assets + Depreciation= ($132 000 $128 000) + $11 000= $15 000NCAI = Chance in current assets Change in (Accounts Payable + Accruals)= ($421 000 $62 000) ($136 000 + $27 000) ($126 000 + $25 000)=$47 000FCF = $82 200 $15 000 $47 000= $20 200Both the operating cash flow and the shrive cash flow are positivistic indicating that Stanley was able to generate adequate cash flow to cover both operating expenses and investments in assets. There was also $20 200 left over to pay to investors.1.) LiquidityAlthough the liquidity of the firm has improve slightly (current ratio) or remained steady (quick ratio), the firms performance is considerably below medium. 2.) ActivityThe nitty-gritty asset turnover of the firm has improved but the inventory turnover and bonnie collection breaker point has deteriorated. The activity of the firm is also considerably below the industry average. 3.) DebtThe debt ratio decreased in the multiplication interest earned ratio improved. This indicates that the firm used more of its own money to generate profit in 2012 (rather than that of its creditors) and its ability to make contractual interest payments has improved. However, the firm fails to measure up to the industrial average yet again. 4.) ProbabilityThe gross, operating and net profit margin and the return on total assets (ROA) fox improved slightly showing that the profitability of the firm is fairl y stable, demonstrating little improvement. Even so, these ratios are solely still subpar. The return of common equity (ROE) has deteriorated, falling to below the industrial average. 5.) MarketThe firms P/E ratio improved but remained bellowed the industry average, showing that the investors are gaining confidence in the firms future performance. The M/B ratio fell below, from above the industrial average in 2011 to below in 2012 but still remains fair. E. Stanley should try to find the money to get hold of the software developer since the ratios show that the firm should be performing better for a firm in this feature industry. In addition, the blockbuster sales potential implies a potential for increased profitability which falls in line with Stanleys focus. F. The present value of a perpetuity creating a cash flow of $5 000 per year with a 10% interest rate =_____Cash Flow____Interest count= $5,000 = $50 000.10The investor would be involuntary to pay $50 000 for the firm.G. The present value of a firm generating a perpetual stream of free cash flow of $20 200 per year with an interest rate of 10 % = ___Cash Flow___ Interest Rate=__$20,200__ =$202,000.10I would be willing to pay $202 000 for the firm.