Star Rivers

Initial Assessment: An initial look at the proportionality analysis reveals that the annual sales- reaping rate has been holding around 15%. This is perhaps the only good nakeds from the analysis. A work discontinuity makes its appearance in FY 2000 as a drop in in operation(p) margin. This was a result of a 21% subjoin in production costs and expenses and a 20% annex in admin and selling expenses. There was also an inexplicable 95% increase in inventory. This jump in inventory and operating expenses appears to have been financed through debt, as the debt/equity and debt/total jacket crown ratios increased during this period. Since the sales growth rate has held steady, there has been no draw down on the excess inventory, thus tie up considerable capital.

The ratio analysis also shows that some(prenominal) the current and quick ratios indicate that there may be cash-flow problems in the near future. The company appears to be experiencing a frizzly reduction in efficiency, and to be financing that inefficiency through debt.

fiscal Forecast: The financial forecast for FYs 2002 and 2003 are shown in accompaniment A. These were forecast using the percent-of-sales method, averaging the most recent two years to provide the primary ratios, with a few exceptions.



This forecast shows that plot maintaining the current levels of operating efficiency, depreciation of existing equipment, and purchasing the new DVD equipment will require additional funds on the ready of SGD 11M for 2002 and a further 25M in 2003. This means that sorcerer River cannot pay off its loan in a likely period.
Sensitivity analysis shows that, while maintaining the current sales growth rate of 15%, the need for additional funds in 2002 is 2003 are relatively insensitive to operating expenses, requiring that operating expenses, as a percentage of sales, be reduced from 50% to under 40% in 2002, and reduced further in 2003, in order to avoid the need for additional financing.

Further sensitiveness analysis shows that...If you want to get a full essay, order it on our website: Orderessay



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