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Miniscribe Case

In: Business and Management

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1.Construct a 1988 Statement of Cash Flows for MiniScribe.

MiniScribe Statement of Cash Flows | (millions of dollars) | | 1988 | | 1987 | | | | | Cash Flows from Operating Activities | | | | | | | | Net Income | 26 | | 31 | | | | | Non-Cash Adjustments | | | | Depreciation Expense | 6 | | 11 | | | | | Changes in Assets and Liabilities Related to Operations | | | | Accounts Receivable | -116 | | -17 | Inventory | -56 | | -39 | Accounts Payable | 143 | | 23 | Accruals | 6 | | 4 | | | | | Net Cash Flow from Operating Activities | 9 | | 13 | | | | | | | | | Cash Flows from Investing Activities | | | | | | | | Purchase of PPE | -9 | | -49 | Purchase of Other Asset | | | -9 | Net Cash Flow from Investing Activities | -9 | | -58 | | | | | | | | | Cash Flows from Financing Activities | | | | | | | | Long term debt | 1 | | 75 | Issuance of Common Stock | | | 4 | Net Cash Flow from Financing Activities | 1 | | 79 | | | | | | | | | Net Change In Cash and Cash Equivalents | 1 | | 34 | | | | | | | | | Cash at Beginning of Period | 50 | | 16 | | | | | | | | | Cash at End of Period | 51 | | 50 |

2.Perform a ratio analysis using the case Appendix to identify red flags for potential fraud at MiniScribe.

Emerging Fraud Models Ratios | 1988 | 1987 | 1986 | 1. Quality of Earnings | | | | OCF | 9 | 13 | 8 | NI | 26 | 31 | 23 | OCF/NI | 0.35 | 0.42 | 0.35 | | | | | 2. Quality of Revenues | | | | Revenue-Change in AR | 487 | 345 | - | Revenue | 603 | 362 | - | (Revenue-Change in AR)/Revenue | 0.81 | 0.95 | - | | | | | 3. Sloan Accrual Measure | | | | NI-Free Cash Flow | 26 | 76 | - | Avg TA | 362 | 206 | - | (NI-Free Cash Flow)/Avg TA | 0.07 | 0.37 | - | | |…...

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