Reference no: EM13983256
2008 Philip J. Adelman and Alan M. Marks Read the case study on page 86 entitled DP Systems, LLC.
Write a 5 page paper (1500 or more words) in APA format in response to questions below.
a. Calculate the current ratio, quick ratio, and net working capital of the firm. What is your opinion about the ratios and cash on hand? Why? (Justify your opinion from the perspective of stockholder in the firm.)
b. Calculate both asset turnover ratios. What is your opinion on them? Why? (Justify your opinion from the perspective of stockholder in the firm.)
c. Page 88 has David's income listed. (You find it.) Given the ratios above, do you think David earned his paycheck? Why or why not?
CASE STUDY: DPSYSTEMS, LLC © 2008 Philip J. Adelman and Alan M. Marks
David Sobelman was born and raised in Glendale, Arizona, where he attended Glendale public schools. After high school, he enrolled in the Computer Information Systems degree program at DeVry University. In 1997, he graduated with a Bachelor of Science Degree in Computer Information Systems. DeVry offers two areas that try to provide students with real-world experience. One is the Senior Project course, in which students develop projects for companies in the area where their campuses are located; the other is an intern program with industry, where students work part-time while attending classes. David’s senior project included writing a client/server application in PowerBuilder for a photography company. The application was so useful that the company continued to use it (with some modifications) for more than 10 years since its initial development. David did part-time work as a consultant for the photographer to update and modify the application. While a student at DeVry, he was also an intern with Salt River Project (SRP), a primary supplier of electricity and water in Phoenix. On graduation, he was hired full-time by SRP as a programmer, working on their customer information systems. After 1 year, David quit SRP and went to work at Integrated Information Systems (IIS) which was a start-up company that was quickly expanding. He was the 60th employee of IIS. After a year, David determined that he was not happy with the IIS expansion and reorganization plans and began looking for another opportunity. He found a job with Choice Hotels International. Subsequently to David leaving IIS, the company expanded very rapidly, went public, and declared bankruptcy within 3 years. He currently works with Choice Hotels at their Western Headquarters in Phoenix, where he is involved in developing Choice Hotels’ web-based property management system (PMS). As of this publication, their PMS is the most widely used system in the industry, and the only hotel company to successfully develop and deploy such a system used by more than 1,500 hotels. Ever since graduating from college, David had an idea to develop a computer- based side business and chose to incorporate DPS, as they were his initials. His primary intention was to create a business that contained a continuous revenue stream. Through the years he has worked with family and friends on a part-time basis, helping with their computer upgrades, fixing computers, installing software, and the like. In 2001, David was elected to the board of his home owner’s association (HOA). One of his goals when he was elected was to put together a website for the community that would provide in- formation about the association to the homeowners. There was a short time between quitting IIS and going to work for Choice when David taught himself Hypertext Markup Language (HTML) and how to work with and build web pages. Within a year, David created a very dynamic user-friendly web page for his HOA. When a community is going to be developed by a builder, they typically hire a management company to manage the day-to-day business of the HOA. The management company often bills the developer to create an HOA website. Having a website in place enhances the viability of the development and makes it easier for the developer transition to a property-owner HOA. Once 75 percent of the homes within the community are sold, the homeowners elect a board of directors and can then keep the current management association or hire a new one. The management company handles all homeowner notifications, inspects the properties, pays invoices, and manages the day-to-day operations of the association.
The property management company that manages several hundred associations in the Phoenix area in addition to the one in which David lives was very satisfied with the quality and functionality of the website David put together. They were impressed by what the web page offered to the homeowners and how it helped open the communications link between homeowners, the Board of Directors, and the management company. The Information Technology (IT) department of the management company was primarily involved in computer hardware and had no real interest in writing software or building websites. As a member of his own HOA board of directors, David met and became familiar with the inner workings of the management company. He developed a proposal and asked the company if they would like him to develop similar websites for each of their HOAs. The management company doesn’t actually pay for the website maintenance because the sites are actually paid for by each individual HOA. David is notified by the management company when any information must be added or removed from an individual HOA website. David’s company charges each HOA a nominal monthly charge to host and update each HOA website. He manages his company out of his home, and almost all correspondence with the management company is handled via email. This part-time job provides David with an additional gross income in excess of $64,000 and a net income including salary and profit in excess of $44,000 per year. See the DP Systems income statement (Table 3–9) and balance sheet (Table 3–10) for 2007. David is an example of an outstanding young entrepreneur.
Three boxes below constitutes a single page for question C.