MiniScribe Case Study Questions
Question 1: Construct 1988 Statements of Cash Flow for MiniScribe.（assume that 1988 depreciation expense is $6）
Table 1: Statement of Cash Flow of MiniScribe of 1988 and 1987
1988
1987
Statement of Cash Flows
Cash Flows from Operating Activities
Net Income
26.00
31.00
Non-Cash Adjustments
6.00
11.00
Changes in Assets and Liabilitites Related to Operations
Change in Accounts Receivable
(116.00)
(17.00)
Change in Inventory
(56.00)
(39.00)
Change in Account Payable
143.00
23.00
Change in Accruals
6.00
6.00
Net Cash Flow from Operating Activities
9.00
15.00
Cash Flows from Investing Activities
Change in PP&E
(9.00)
(49.00)
Change in Other Assets
0.00
(9.00)
Net Cash Flow from Investing Activities
(9.00)
(58.00)
Cash Flows from Financing Activities
Change in Longterm Debt
1.00
75.00
Change in Common Stock
0.00
0.00
Change in APIC
0.00
4.00
Net Cash Flow from Financing Activities
1.00
79.00
Net Change In Cash and Cash Equivalents
1.00
34.00
Cash at Beginning of Period
50
16
Cash at End of Period
51
50
Question 2: Perform a ratio analysis using the case Appendix to identify reg flag for potential fraud at MiniScribe
Traditional Ratio Analysis
1. Company Profitability
Profitability ratios measure how effectively a firm’s management is generating profits on sales, total assets, and, most importantly, stockholders’ investment.
1) Profit Margin
The profit margin is the ratio of the net income to revenue. It measures how much out of every dollar of sales a company actually keeps in earnings. Higher profit margin is better because it indicates that the company is more profitable and has better control over its costs compared to the competitors in the same industry.
Chart 1: Comparison of profit margin between MiniScribe and Industry
The above chart is made based on the financial ratios provided on Page 37 of handout notebook. According to the chart, MiniScribe behaved well
Table 1: Statement of Cash Flow of MiniScribe of 1988 and 1987
1988
1987
Statement of Cash Flows
Cash Flows from Operating Activities
Net Income
26.00
31.00
Non-Cash Adjustments
6.00
11.00
Changes in Assets and Liabilitites Related to Operations
Change in Accounts Receivable
(116.00)
(17.00)
Change in Inventory
(56.00)
(39.00)
Change in Account Payable
143.00
23.00
Change in Accruals
6.00
6.00
Net Cash Flow from Operating Activities
9.00
15.00
Cash Flows from Investing Activities
Change in PP&E
(9.00)
(49.00)
Change in Other Assets
0.00
(9.00)
Net Cash Flow from Investing Activities
(9.00)
(58.00)
Cash Flows from Financing Activities
Change in Longterm Debt
1.00
75.00
Change in Common Stock
0.00
0.00
Change in APIC
0.00
4.00
Net Cash Flow from Financing Activities
1.00
79.00
Net Change In Cash and Cash Equivalents
1.00
34.00
Cash at Beginning of Period
50
16
Cash at End of Period
51
50
Question 2: Perform a ratio analysis using the case Appendix to identify reg flag for potential fraud at MiniScribe
Traditional Ratio Analysis
1. Company Profitability
Profitability ratios measure how effectively a firm’s management is generating profits on sales, total assets, and, most importantly, stockholders’ investment.
1) Profit Margin
The profit margin is the ratio of the net income to revenue. It measures how much out of every dollar of sales a company actually keeps in earnings. Higher profit margin is better because it indicates that the company is more profitable and has better control over its costs compared to the competitors in the same industry.
Chart 1: Comparison of profit margin between MiniScribe and Industry
The above chart is made based on the financial ratios provided on Page 37 of handout notebook. According to the chart, MiniScribe behaved well