Management Information Systems: Dirt Bikes, Yahoo! Financial Decisions

This assignment presents a case study analyzing the decision-making processes of two companies: Dirt Bikes and Yahoo!. The first part examines Dirt Bikes' choice between buying or renting software licenses, evaluating costs, and considering non-quantitative factors like employee morale and goodwill. The second part focuses on Yahoo!, providing a historical overview of the company, its organizational structure, and financial performance. The assignment includes balance sheets and income statements from 2015 and 2016, highlighting revenue, operating expenses, and net income. The analysis traces Yahoo!'s decline, discussing missed opportunities, strategic missteps, and the impact of competition. The conclusion summarizes the financial changes Yahoo! underwent, its acquisitions, and the impact of these on the company's survival. The assignment uses a variety of credible sources to support the analysis.

MANAGEMENT INFORMATION
ASSIGNMENT

Contents
Answer to question 1:..................................................................................................................................2
Answer to question 2:..................................................................................................................................5
Bibliography................................................................................................................................................8

Answer to question 1:
Decision making is an important functional task undertaken by the management of the company
to ensure that it makes rightful decisions in the field of costs and revenues impacting the
organization directly or indirectly. Dirt Bikes wishes to undertake a decision regarding buying or
renting license for software packages. Let us individually analyze the two alternatives:

DIRT BIKES
ALTERNATIVE 1: BUYING THE LICENSE
PARTICULARS AMOUNT AMOUNT
DETAILS DETAILS
Purchase price 100000
Implementation and customisation costs 20000
New Server 4000
Salary of a software specialist Year 1 55000
Year 2 56650
Year 3 58350 170000
User Training 10000
Cost of Software Upgrades Year 1 5000
Year 2 5000
Year 3 5000 15000
Total Estimated Costs 304000
ALTERNATIVE 2: RENTING THE LICENSE
PARTICULARS AMOUNT AMOUNT
DETAILS DETAILS
Rental fees (2500*25) Year 1 62500
Year 2 62500
Year 3 62500 187500
Implemenattion and customisation costs 12000
Training Costs 10000
Total Estimated Costs 209500
Since the cost from renting the license is low as compared to that of buying it, it would be
advisable for the organization to rent it and save $109500.
Decision making phase usually involves quantitative factors but it also consists of undertaking
several activities to analyze various other non-quantitative factors as well. Other than costs i.e.,

quantitative factors, any organization should also consider the below mentioned points before
making such decisions:
 Morale of the staff members and employees: any decision is likely to place its impact on
the members of the team. Their attitude shall have a direct consequence on the
acceptance or rejection of the proposal (Linden & Freeman, 2017)
 Investors: many times companies are bound to take decisions that enhance and support its
investors in the right manner against an increase in costs
 Goodwill: Organizations undertake decisions without evaluating the relevant costs if it
adds or enhances its goodwill.

Answer to question 2:
Yahoo! Is US based web service provider with its head quarters located at Sunnyvale in
California. It was founded by two engineering graduates named Jerry Yang along with the
collaborative effort of David Filo. It was listed amongst one of the reputed pioneers in the
internet era in the late 1990s. Currently owned by the Verizon media, this subsidiary company
ranks 9th in the global platform.
This website was originally named after its founders as a roadmap providing guidance to using
the World Wide Web. It enabled the users to this website to surf the internet in an organized yet
complete manner (Choy, 2018).
The organizational structure of the organization currently comprises of Marissa Mayer as the
CEO. The previous CEOs consisted of Rose Levinsohn, Scott Thompson and Tim Morse.
The financial statements of the company of the last two years are presented as follows:

BALANCE SHEET
PARTICULARS 2015 2016
AMOUNT AMOUNT AMOUNT AMOUNT
DETAILS DETAILS DETAILS DETAILS
Current Assets
cash 1631911 1119469
Marketable securities 4225112 5700925
Accounts Receivable 1047504 1084267
Prepaid expenses 602792 7507319 221499 8126160
Long term marketable securities 975961 1089707
Property and equipment 1547323 1209937
goodwill 808114 415809
Intangible Assets 347269 161644
Other Long term investments 342390 206059
investments in Alibaba 31172361 33680879
Investments in equity interests 2503229 3192884
Total Assets 45203966 48083079
Current Liabilities
Accounts Payables 208691 171520
Otehr accrued expenses and current liabilities 934658 1006676
Deferred Revenue 134031 1277380 109228 1287424
Convertible notes 1233485 1299945
other long term liabilities 27801 39583
Deffered Tax Liabilities in Alibab group 118689 95597
other long term liabilities 12611867 13633988
Commitments and other contingencies 855324 642466
Equity
Preferred stock
Common stock 959 969
Additional Paid up capital 8807273 9125459
Treasury stock -911533 -908996
Retained earnings 4570807 4353958
Accumulated and other comprehensive income 16576031 29043537 18477893 31049283
Non controlling interests 35883 34793
Total equity and liabilities 45203966 48083079

INCOME STATEMENT
PARTICULARS 2015 2016
AMOUNT AMOUNT AMOUNT AMOUNT
DETAILS DETAILS DETAILS DETAILS
Revenue 4968301 5169135
Operating expenses:
Cost of revenue-traffic acquisition costs 877514 1650786
Cost of revenue- others 1200234 1068108
Sales and marketing 1080718 881521
product development 1177923 1055462
general and administrative 687804 650708
amortization of intangibles 79042 58302
gain on sale of patenets and land -11100 -121559
asset impairment 44381
Goodwill impairment 4460837 394901
intangibles asset impairment 15423 87335
restructuring charges 104019 88629
Total Operating expenses 9716795 5814193
Income from operations -4748494 -645058
other income -75782 -53916
EBIT -4824276 -698974
Taxes 89598 126228
earnings in equity interest 383571 363283
Net Income -4351107 -209463
Yahoo! Was considered as one of the major leads in its industry but it noticed a drastic change
when its sales had fallen from $7.2 bn in the year 2008 to $4bn in the year last year. This was
majorly because of the arrival of its strong competitors in this field. To add worse to this
situation, it started provided everything to everyone instead of concentrating on its core. The
company went through constant changes in its organizational structure. (Mahmood, 2016)
In the year 2002 and 2006 Yahoo respectively approached Google and Facebook for a deal and
lost it without any further negotiation. Also in the year when two years later Microsoft had
approached Yahoo with a takeover intentioned deal of approximately $ 44 billion, the CEO of
the company resisted and left its position from the BOD in the year 2012 (Jefferson, 2017).

Soon after the organization acquired Tumblr in the year 2013, it was highly assumed that Yahoo!
would definitely jump from its setback to give competition to its peers. Marissa Mayer, the CEO
of the organization placed a reasonably good stake of conquering a blog but unfortunately it
turned the tables down. Revenues fell drastically even after snatching back serious market share
from Google. Although it made some decent acquisitions and structural changes, it could not
stop its revenues from tumbling. It thus led to sale of the organization and a drastic downfall in
the company’s worth from a whooping $100 billion to just $4 billion (Heminway, 2017).
The company finally had to sell its major stake to Alibaba Group to ensure its existence.
Considering the balance sheet and the income statement of the organization as presented above,
it is quite clear that the company has undergone some serious changes to enable it to survive in
this competitive industry. It has shown an increase in its sales by 6.05% ($ 200834 bn). Its
operating expenses have shown a downward trend posting a decrease of about $ 3902602 bn in
the financial year ending 31st December 2016. Losses have decreased substantially proving that
its acquisition was a necessary move for its survival. (Thomas, 2016)

Bibliography
Choy, Y. K. (2018). Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview
Analysis. Ecological Economics, 3(1), 145. doi:https://doi.org/10.1016/j.ecolecon.2017.08.005
Heminway, J. (2017). Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and
Organic Documents. SSRN, 1-35.
Jefferson, M. (2017). Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland .
Technological Forecasting and Social Change, 353-354.
Linden, B., & Freeman, R. (2017). Profit and Other Values: Thick Evaluation in Decision Making. Business
Ethics Quarterly, 27(3), 353-379. Retrieved from https://doi.org/10.1017/beq.2017.1
Mahmood, F. (2016). Yahoo's demise: the internet giant failure is a story of missed . The Express Tribune.
Thomas, D. (2016). Yahoo-where did it allgo wrong. BBC News.