Star River Electronics Ltd Marketing Case

Star River Electronics
Name
Institutional Affiliation
Star River Electronics
Question 1
In analyzing the financial health and performance of the firm, it is necessary to have a look at the entire industry and at the same time, the performance of the firm in recent years. First and foremost, the firm has had a steady rise in its sales which is commendable. In between 1998 and 1999, the firm had an 11.8% increase in sales which elevates to 14.5% between 2000 and 2001. Similarly, the operating expenses increased at a relatively slower rate. For instance, the period between 2000 and 2001 had a 13.8% increase. In assessing the exact financial position of the firm, liquidity ratios help analyze whether the firm is operating for its equity or debt in response to the increase in the sale margins. Star River Electronics has its current ratios over the years below 1.0 which poses a significant risk if the firm faces a financial constraint. However, the fact that it has improved its current ratio from 0.76 to 0.88 indicates its ability to meet short-term debt is getting stronger and hence, becoming more financially stable. However, as the situation stands, the firm would have to sell much of its inventory to meet these obligations as its quick ratio is weak. Therefore, the business and its management have to fix significant issues in the firm if it is to avoid cash-flow problems soon.
Question 2
The firm faces significant issues in their asset sector which are the primary production tools and essential to business operations. They have equipment that are depreciating at a considerable rate. Moreover, the firm requires the acquisition of new DVD packaging equipment which comes at the cost of SGD 1.82 million but eliminating the essence of maintenance and labor costs. According to Koh’s projections, the firm is likely to have a 15% growth rate which is a reasonable target considering they are at 14.5% at the moment. If the firm is to proceed with the current operational efficiency, it will need significant external funding of more than SGD 35M for the next two years and which have to be long-term because as the situation stands, they cannot service their loans in a reasonable period.
Question 3
The sentiment mentioned above disregards the role of operating expenses even though the acquisition of new equipment will lower the operating costs by a higher margin. The need for exter...