Star River Electronics

Introduction

Star River Electronics LTD (Star River) is going through a transition in leadership that will affect how it strategically moves forward. On June 28, 2001, their CEO resigned, seven days later Adeline Koh was appointed to this position. Adeline Koh came from an Asian venture-capital firm, New Era Partners, that teamed with Starlight Electronics Ltd to form this joint-venture.

Star River is a CD-ROM manufacturer based in Singapore. The CD-ROM manufacturing market became flooded in the mid-1990s due to the technology boom, which caused a shakeout of many of the manufacturers. Star River survived because of its reputation.

Star River was forecasting to gain a larger proportion of revenue from DVD drive sales, a market they were moving into because of a forecasted decline in the CD-ROM industry.

1.   Assess the current financial health and recent financial performance of the company. What strengths and/or weaknesses would you highlight to Adeline Koh?

Current Financial Health

Star Rivers’ Financial health is a mixed review. The balance sheet is unhealthiest, while the financial ratios for profitability (ultimately derived from the income statement) are its strongest aspect.

Certain financial measures stand out as issues for Star Rivers’ financial health resulting in the companies’ financials looking poorly. All area related to the balance sheet. Star River has issues in the following financial areas:

• Inventory

• Short-term debt

• Capital funding of new projects

But, Star River’s financial health looks better when you analyze the income statement and financial ratios related to that report. Profitability has slid from 1998, but that is expected in this industry. It has increased sales during a time of shakeout and consolidation, while remaining profitable and offering good returns.

Strengths / Weaknesses to Highlight for the new CEO

The weakness in inventory control has to be highlighted as one of...