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Financial Management Case Study
Assessing the goals
of Sports Products
Inc.
By: Lyndon Sedres MA0N0226
1. What should the goal of the
company pursue as its
overriding goal? Why?
The overriding goal of the
company should be to
maximize the wealth of the
owners. A firm which is not
making money and incurring
huge debts will eventually
cease to exist.
2. Does the firm appear to have
an “agency problem?”
Explain.
Yes, the firm has a definite
“agency problem”. The profit
was more important to
management and this was
directly affecting their
remuneration. Management
was not concerned about
their own interests before
the interests of the firm.
3. Evaluate the firm’s approach to
pollution control. Does it seem to be
ethical? Why might incurring the
expense to control pollution be in the
best interest of the firm’s owners
despite its negative effect on profits?
There is a definite lack of pollution
control and the firm doesn’t seem to
care. Based on this practice, it does
not seem ethical.
Incurring the expense to control
pollution will definitely be in the best
interest of the company, because it
will not create negative publicity.
This might also be tax deductable as
certain governments allow for this
concession.
4. Does the firm appear to have
an effective corporate
governance structure?
Explain any shortcomings?
This firm does not have an
effective corporate
governance structure.
Management have their own
agendas and the stock price
fell nearly US$2 per share
over the past nine months.
Therefore the firm is not
being efficiently monitored
and controlled.