Flash Memory

Flash Memory, Inc.

Flash Memory, Inc is a California company which produces memory system for computers and other electronic devices. Currently, the company focuses on solid state drives (SSDs), which comprised the fastest growing segment in the overall memory industry. However, as the most science and technology company, it competes in product markets that reflected fast growth, continuous technological change, short product life cycles, changing customer wants and needs, a large number of competitors, and a high level of rivalry within the industry.

As a high-technology, the Flash Memory has high reinvestment rate in order to keep the competitiveness in the market. From the previous balance sheet we can see, the company is highly relying on external financing. The ratio of notes payable over shareholders’ equity and notes payable is around 30% in 2008 and 2009.

For the future financial forecast, the company’s profitability will increase dramatically to 3,396 thousand dollars in 2010, 3,947 thousand dollars in 2011 and 3,801 thousand dollars in 2012. The total asset will have a huge growth as well, 44,034 thousand dollars in 2010, 51,926 thousand dollars in 2011 and 52,145 thousand dollars in 2012. According to the predicted balance sheet, the company’s finance will still highly rely on bank loan in 2010 and 2011. The loan will be 14,595 thousand dollars and 17,220 thousand dollars and will account for 74% and 72.7% of accounts receivable respectively. Base on the agreement with the commercial bank, this will cause a higher interest rate of 9.25%. This situation will improve in 2012, the bank loan will decrease to 13,648 thousand dollars, and the ratio of notes payable over account receivable decreases to 57.7%. Besides, it will decrease the interest rate to 7.25%.

In addition, there is an investment opportunity of a major new product line. This is expected to have a significant impact on the company’s sales, profits, and cash flows. Firstly, 400,000 dollars...