Asi, Inc. Case Study
I. Brief Background of the Case
August Scientific Instruments, Inc. (ASI, Inc.) is a small private company which specializes in the manufacturing of miniature electromechanical components. It is located on a small but progressive town wherein a Technical Education Institute is also based. At first, the company underwent several problems and setbacks and was able to grow steadily and expand its operations until in 1958; it was able to acquire additional investments, substantial monthly sales and workers, and started to have backlog of orders. As time pass by, the backlog had grown at an alarming rate which is brought by the inability of the company’s production to meet the demands of the customers. The company decided to have a major expansion by loaning from banks and allocating the 80% of the account receivables as payment. However, this was not enough to sustain and match the increasing orders from the customers. To address the new stage of growth it is facing, the company is opting to get financial help from outside or freeze the size of the company at an artificially low level since the stockholders had already exhausted their cash resources. To cope up with its situation, the company needs a new plant at an estimated cost of $350,000; and capital of about $200,000 for the procurement of additional equipment and machinery, and for the financing of the training for additional personnel. The company also considered locating in other city that offered inducements of a new building and tax-free advantages, but it did not want to leave the community where it enjoyed a cooperative arrangement with the scientific educational institution and other advantages. On the other hand, the business community doesn’t want to lose the company since it was the major source of the earnings of the students there. The local bank was willing to help but the proposed project was too much and over its capacity. Other lending sources with greater capacity had been approached but
August Scientific Instruments, Inc. (ASI, Inc.) is a small private company which specializes in the manufacturing of miniature electromechanical components. It is located on a small but progressive town wherein a Technical Education Institute is also based. At first, the company underwent several problems and setbacks and was able to grow steadily and expand its operations until in 1958; it was able to acquire additional investments, substantial monthly sales and workers, and started to have backlog of orders. As time pass by, the backlog had grown at an alarming rate which is brought by the inability of the company’s production to meet the demands of the customers. The company decided to have a major expansion by loaning from banks and allocating the 80% of the account receivables as payment. However, this was not enough to sustain and match the increasing orders from the customers. To address the new stage of growth it is facing, the company is opting to get financial help from outside or freeze the size of the company at an artificially low level since the stockholders had already exhausted their cash resources. To cope up with its situation, the company needs a new plant at an estimated cost of $350,000; and capital of about $200,000 for the procurement of additional equipment and machinery, and for the financing of the training for additional personnel. The company also considered locating in other city that offered inducements of a new building and tax-free advantages, but it did not want to leave the community where it enjoyed a cooperative arrangement with the scientific educational institution and other advantages. On the other hand, the business community doesn’t want to lose the company since it was the major source of the earnings of the students there. The local bank was willing to help but the proposed project was too much and over its capacity. Other lending sources with greater capacity had been approached but