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Miniscribe

In: Business and Management

Submitted By vacortez
Words 1427
Pages 6
EXECUTIVE SUMMARY

Terry Johnson, a native of Longmont, Colorado established the MiniScribe Corporation, a disk drive manufacturing company that would grow to be one of the largest producers and distributors of disk drives for personal computers in America.

This report focuses on relevant facts and figures in the evaluation of MiniScribe’s liquidity, profitability, and overall stability aiming to determine whether or not maintaining its stocks on the Alexander and Ferris brokerage firm’s “Buy” list is a practical action. The primary methods of analysis include the assessment of various liquidity and efficiency ratios together with quarterly statements of cash flow for 1988 which can be found in the appendices.

Given the results of the analyzed data inclusive of industry trends, financial reports, and ratios, the group's decision is to have Alexander and Ferris remove MiniScribe's stocks from its "Buy" recommendation list not only because of poor performances when it comes to profitability and liquidity but also due to factors related to dwindling management capacities.

Although the corporation is increasing its efforts in the research and development department, the investments made have not translated to a significant improvement in income as MiniScribe continues to experience a rise in expenses without the same degrees of increase in sales. These investments are rapidly becoming a financial burden because of the high costs that come with them. Operational cash flows are also in constant decline further showing why profitability is a going concern.

A majority of the corporations' resources are tied up in inventories which MiniScribe has a problem turning over in a shorter period of time as compared to industry standards. Collections also suffer from poor management and controls as accounts are held up by as much as three months compared to the…...

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