You are starting a market research company with a single business partner and are planning the hardware and software need for the two of you. Which factors should play into your decision of how much to spend on these investments?
What will be an ideal response?
Using the competitive forces model for IT infrastructure investment, the most relevant factors in this decision are:
• The firm's business strategy. What capabilities will we want to have over the next five years?
• Alignment of IT strategy. How does our IT strategy match up with the business plan?
• IT assessment. What are the current technology levels for the services we are offering and our business type? We would probably not need to be at the bleeding edge, but not behind the times either.
• Competitor firm services. What technology-enabled capabilities do our competitors have? We would want to match services with our competitors.
• Competitor firm IT investments. How much are competitor firms investing in their technology?
Because this is a startup, one other factor may not play such a large role: that of market demand for services. However, finding out the market demand for competitor's services may uncover ways that this new company could have a competitive advantage.
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The Protek Company is a large manufacturer and distributor of electronic components. Because of some successful new products marketed to manufacturers of personal computers, the firm has recently undergone a period of explosive growth, more than doubling its revenues over the last two years. However, the growth has been accompanied by a marked decline in profitability and a precipitous drop in the company's stock price. You are a financial consultant who has been retained to analyze the company's performance and find out what's going wrong. Your investigative plan involves conducting a series of in-depth interviews with management and doing some independent research on the industry. However, before starting, you want to focus your thinking to make sure you can ask the right questions.
You'll begin by analyzing the firm's financial statements over the last three years.
PROTEK COMPANY
INCOME STATEMENTS
For The Periods ended 12/31
(000,000)
You are responsible for the following:
1) Complete the ratios indicated for three years
2) Compare the ratios to the industry in a write up. Indicate if the specific ratio is better or worse than the industry and why
Ratios to calculate:
1) Current Ratio
2) Average Collection Period
3) Debt Ratio
4) Times Interest Earned Ratio
5) Return on Equity
The Industry averages are as follows:
Industry
Average 20X1 20X2 20X3
Current Ratio 4.5
ACP 42 days
Debt Ratio 53%
TIE 4.5
ROE 22.8%
Aristotle believed that it is inconsistent with "goodness" to use a "bad" means to achieve a good end, so both the means used and the ends achieved must be "good."
Indicate whether the statement is true or false