July 6, 2012
The case subject revolves around MiniScribe, a manufacturer of disk storage products that is under the watch list for rumors directed to the firm’s problems with cash flow and inventory. The objective of the report is to come up with a BUY OR DON’T BUY recommendation for Alexander & Ferris using the available financial and qualitative information.
The analysis was conducted by deriving additional information from available financial data and proceeding with an interpretation of the results in light of qualitative information. The group developed decision lists for a BUY or DON’T BUY recommendation and these were compared against relevant factors that …show more content…
This is evidenced as well in Exhibit 1. Consolidated Income Statement. It shows that MiniScribe is still profitable and investors may still hold their shares in the company.
Third, MiniScribe still has positive and stable Return on Equity as evidenced in Exhibit 3.
Exhibit 3. Return on Equity
This can be much explained using Du Pont Equation and through analyzing the information, shown in Exhibit 4. Du Pont Analysis, even though cost management is somehow ineffective, the company still generates income and investments can be done from this and other sources of financing.
Exhibit 4. Du Pont Analysis
Fourth, MiniScribe has a good reputation for their R&D Commitment. Investment activities are high as evidenced in Exhibit 5. Consolidated Statement of Cash Flow.
Exhibit 5. Consolidated Statement of Cash Flow
This shows that Property, Plant, and Equipment was given priority for Research and Development activities, which ranked third in the expenses with most spending, as evidenced in Exhibit 6. Vertical Analysis - Common Size of the Income Statement.
Exhibit 6. Vertical Analysis - Common Size of the Income Statement
Also, in 1987, Electronic Business, a leading trade journal, ranked Miniscribe second in R&D spending with a 131.7% increase over 1986. Further pursuing this branding strategy, it is a likely the case that MiniScribe earned itself a loyal following.