Financial Statement Analysis

Star Electronics

Assignment

Star Electronics is a small manufacturer of specialised, top of the range, electronic components $($such as power switches, modems and server parts$)$ used in the assembly and manufacture of business computer systems. The company has recently been under pressure from its bankers and has requested you, as an independent consultant, to review its performance, and suggest what they might be able to do to improve its financial position.

Please start your research by answering the following questions:

Sales and profitability

What is your view of Star's profitability relative to the previous year, and relative to peers?

Does the company appear to have any problems in respect of sales and profitability?

Asset management

$3.$ How well does the company utilise its assets and how does this compare to the industry?

$4.$ What conclusions can you draw about the company's asset efficiency?

Funding

$5.$ What is your view of the company's debt structure? Which ratios can you use to indicate the company's financial strength?

$6.$ What are Star's current and quick ratios? What do they tell you about the company's liquidity position?

$7.$ What are the limitations of ratio analysis?

$8.$ Please derive the cash flow statement for the company and assess debt service capability.