EXECUTIVE SUMMARYTerry 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 ...view middle of the document...
It can also be seen that to support the declining cash flows, the corporation is continuously relying on short-term borrowings and other financing options which further add stress to MiniScribe's cash flow problems come payback. These issues further substantiate the corporation's illiquidity concern.Several areas of weakness exist in the corporation's current position making it a negative prospect in terms of future stock value. Based on the available data, it is clear that retaining the corporation in the brokerage firm's "Buy" list will not be a wise decision.Given the poor results of financial comparisons between the corporation and industry standards, the group recommends that Alexander and Ferris remove MiniScribe Corporation from its "Buy" recommendation list until the point when problem areas have been investigated and remedial actions have been taken by the corporation's management presenting significantly positive changes in terms of the corporation's income generating capacities.The group understands that the case has limitations and has considered these in making the report. Some of these limitations include the availability of historical but not current data for both MiniScribe and the industry and the incompleteness of detailed figures (i.e. absence of purchases) on the financial statements.POINT OF VIEWThe group decided to analyze the case using Alexander and Ferris research analyst Ms. Paula Perry's point of view.CASE CONTEXTTechnology was a fairly new concept during the conception of MiniScribe Corporation. Offerings were restricted and new products were entering the market at a slow pace. During this time, consumer acceptance was also limited. The uncertainty of the industry and the shifts that occurred in the supply and demand chain has affected the operational capacity of the corporation and continued to do so. Even with a full-blown reorganization in their midst, the ever-changing industry proved to be an issue for the corporation trying at all costs to stay afloat.PROBLEM DEFINITIONAlexander and Ferris, a brokerage firm, has maintained the stocks of MiniScribe Corporation on its "Buy" list for some time but given the current situation of the firm and industry, they are at odds on whether or not to pull the plug on MiniScribe and remove it from their list of recommended stock offerings.ANALYSIS FRAMEWORKTo generate reliable recommendations, the group studied the corporation's performance for the past nine months. Data were drawn from the corporation's unaudited interim financial statements ended 02 October 1988, and were processed and analyzed by computing relevant financial ratios and comparing it to the industry's ratios for the first three quarters of 1988. Furthermore, the corporation's historical stock prices were taken into account to aid in the analysis of the MiniScribe's performance. Lastly, the industry's conditions were included in the assessment to identify possible situations that may have an effect on the over...
