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(1) Stanley is focusing on profit maximization.

We can see that from 2003 to 2009 the company's profit keep on increasing. Aside from that, his intension of hiring new siftware developer in order to increase company's sales and earning also confirme Wealth maximazation should be the correct goal as it's focusing on long-term benefit, cash flow, and risk and return. While p (2) Agency problem occurs when manager place their personal goals ahead of corporate goals. In this case, Stanley only hold 40% of total shares so agency problem would unlikely to occur.

any's profit keep on increasing. y's sales and earning also confirmed this point. flow, and risk and return. While profit maxaimazation ignores time value of money and those aspects.

Earnings Available for Common Stock (EPS) Year 2003 2004 2005 2006 2007 2008 2009 Net profits after taxes Number of common stock -50,000 50,000 -20,000 50,000 15,000 50,000 35,000 50,000 40,000 50,000 43,000 50,000 48,000 50,000 EPS $-1 $-0.4 $0.3 $0.7 $0.8 $0.86 $0.96 -1 -0.4 0.3 0.7 0.8 0.86 0.96

Comment: EPS keeps on increasing throughout the years which confirms to the point of profit maximization of Stanley.

Operating cash flow (OCF) OCF = NOPAT + Depreciation OCF = [EBIT * (1-t)] + Depreciation OCF = [89,000 * (1.00 - 0.20) ] + 11,000 OCF = $82,200 Conclusion:

During 2009 Track software generated $82,200 of cash flow from producing and selling its output. We conclude that Track softwar

Free cash flow (FCF) FCF = OCF - ( Net fixed asset investment - Net current asset investment ) FCF = $64,400 - ( Change in net fixed aset + depreciation ) - ( Change in current assets - Change in account payable and accruals) FCF = $64,400 - ( 4,000 + 11,000 ) - ( 59,000 - 12,000) FCF = $64,400 - (15,000 ) - ( 47,000) FCF = $2,400 Conclusion:

During 2009 Track software generated $2,400 of free cash flow, which it can use to pay its investors, creditors and owners. The firm generated adequate cash flow to cover all of its operating costs and investment and had free cash flow available to pay in

ng its output. We conclude that Track software's operation are generating positive cash flow

s - Change in account payable and accruals)

pay its investors, creditors and owners. ment and had free cash flow available to pay investors.

Actual Ratio Current ratio Quick ratio Inventory turnover Average collection period Total asset turnover Debt ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA) Return on common equity (ROE) Price/earnings (P/E) ratio Market/book (M/B) ratio

Actual

Industry Average 2009 1.82 1.1 12.45 20.2days 3.92 0.55 5.6 42.30% 12.40% 4% 15.60% 34.70% 7.1 2.2

Evaluation TS Improving Improving Deteriorating Deteriorating Improving Good Improving Good Good Stable Good Deteriorating Fair Deteriorating CS Poor Poor Poor Poor Poor Fair Poor Poor Poor Fair Poor Fair Poor Poor

2008 2009 1.06 1.16 0.63 0.67 10.4 5.39 29.6days 35.79days 2.66 2.80 0.78 0.73 3 3.07 32.10% 34% 5.50% 6% 3% 3% 8% 9% 36.40% 32% 5.2 5.50 2.1 1.74

In conclusion: Overall performace of Track Software comparing to its industry is still doing poor in almost all aspect as we can see from the ratio a Main points to be considered are inventory turnover and average collection perioed. They have deteriorated considerably and muc

35.79

0.34 0.06 0.03 0.09 0.32 EPS BV/CS

0.96 3.04

most all aspect as we can see from the ratio analysis. hey have deteriorated considerably and much worse than industry.

Since profit maximization is the main goal, Stanley should find out ways to generate cash in hiring new software manager for and boost up sales and earnings in the long run.

hiring new software manager for lauching his new product

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