Track software inc integrative case 2

Integrative Case 2, Track Software, Inc., places you in the role of financial decision maker to introduce the basic concepts of financial goal-setting, measurement of the firm’s performance, and analysis of the firm’s financial condition. Because this seven-year-old software company has cash flow problems, you must prepare and analyze the statement of cash flows. Interest expense is increasing, and the firm’s financing strategy should be evaluated in view of current yields on loans of different maturities. A ratio analysis of Track’s financial statements is used to provide additional information about the firm’s financial condition. You are faced with a cost/benefit tradeoff: Is the additional expense of a new software developer, which will decrease short-term profitability, a good investment for the firm’s long-term potential? In considering these situations, you have become familiar with the importance of financial decisions to the firm’s day-to-day operations and long-term profitability.

Year

Net Profits After Taxes

EPS (NPAT ¸ 50,000 shares)

2009

($50,000)

$ 0

2010

(20,000)

0

2011

15,000

0.30

2012

35,000

0.70

2013

40,000

0.80

2014

43,000

0.86

2015

48,000

0.96

Earnings per share has increased steadily, confirming that Stanley is concentrating his efforts on profit maximization.

1. Calculation of Operating and Free Cash Flows.

2. Earnings per share (EPS) calculation.

Ratio Analysis Track Software, Inc.

Industry

Actual

Average

TS: Time-Series

Ratio

2014

2015

2015

CS: Cross-Sectional

Net working

TS: Improving

capital

$21,000

$58,000

$96,000

CS: Poor

Current ratio

1.06

1.16

1.82

TS: Improving

CS: Poor

Quick ratio

0.63

0.63

1.10

TS: Stable

CS: Poor

Inventory turnover

10.40

5.39

12.45

TS: Deteriorating

CS: Poor

Average collection

TS: Deteriorating

period

29.6 days

35.8 days

20.2 days

CS: Poor

Total asset

TS: Improving

turnover

2.66

2.80

3.92

CS: Poor

Debt ratio

0.78

0.73

0.55

TS: Decreasing

CS: Poor

Times interest

TS: Stable

earned

3.0

3.1

5.6

CS: Poor

Gross profit

TS: Improving

margin

32.1%

33.5%

42.3%

CS: Fair

Operating profit

TS: Improving

margin

5.5%

5.7%

12.4%

CS: Poor

Net profit margin

3.0%

3.1%

4.0%

TS: Stable

CS: Fair

Return on total

TS: Improving

assets (ROA)

8.0%

8.7%

15.6%

CS: Poor

Return on

TS: Deteriorating

equity (ROE)

36.4%

31.6%

34.7%

CS: Fair

Analysis of Track Software based on ratio data: Find and comment on the ratios below relating to the company.

1. Liquidity.

2. Operating Activity

3. Debt.

4. Profitability.

The case study is required to be completed. The case study due on Sunday at 11:59pm. You are to write a minimum of 5 pages using in-text citations and the most recent published journals. All assignments must follow APA format style and submit for grading. The format of the cover page: Title, First Last Name, Course Title, Professor’s Name, Date Submitted. See attached APA format of referencing your paper.