Ariana Orfanella
Star River Electronics Case Study
Overall Company Performance Star River’s finances initially lead you to believe that there has been a steady incline of growth and success. The sales increase appears to represent healthy all around healthy growth. Their sales have averaged a steady incline of around 15% growth per year which seems encouraging until you look at several other factors. All of this should be backed up by looking at Net Income, however that’s where the findings start to look grim. The company lost 34% of earnings between 1999 and 2000, but manage to come out of that loss by 2001. However, even without significant loss here, the Net Income does not equally represent the strength in the company’s financial growth the way sales do. The overall production costs have increased steadily as well, but this is probably due to the large amount of inventory added between 2000 and 2001. We see the increase of inventory cost spike from an 35% up to 58%, increasing total assets and we see that reflected back into the sales. This is supported also by the large spike (49% increase) in short-term debt from 1999 to 2000. We can assume this debt was taken on in order to …show more content…
The first and largest red flag for the forecasted operating budget is looking at the total operating expenses vs. total sales. By 2003 although the growth in sales to $140,281 seems like a nice, steady incline, operating expenses have raised to $114,219. Taking up 81.4% of the earnings. This leaves very little wiggle room in the budget for dividends, loan repayment, etc. let alone new expensive equipment. Although the company would not be left in the red, their net earnings by 2003 would not be sufficient to fund the new equipment they need without additional financial
Star River Electronics Case Study
Overall Company Performance Star River’s finances initially lead you to believe that there has been a steady incline of growth and success. The sales increase appears to represent healthy all around healthy growth. Their sales have averaged a steady incline of around 15% growth per year which seems encouraging until you look at several other factors. All of this should be backed up by looking at Net Income, however that’s where the findings start to look grim. The company lost 34% of earnings between 1999 and 2000, but manage to come out of that loss by 2001. However, even without significant loss here, the Net Income does not equally represent the strength in the company’s financial growth the way sales do. The overall production costs have increased steadily as well, but this is probably due to the large amount of inventory added between 2000 and 2001. We see the increase of inventory cost spike from an 35% up to 58%, increasing total assets and we see that reflected back into the sales. This is supported also by the large spike (49% increase) in short-term debt from 1999 to 2000. We can assume this debt was taken on in order to …show more content…
The first and largest red flag for the forecasted operating budget is looking at the total operating expenses vs. total sales. By 2003 although the growth in sales to $140,281 seems like a nice, steady incline, operating expenses have raised to $114,219. Taking up 81.4% of the earnings. This leaves very little wiggle room in the budget for dividends, loan repayment, etc. let alone new expensive equipment. Although the company would not be left in the red, their net earnings by 2003 would not be sufficient to fund the new equipment they need without additional financial