Star River

Star River Electronics, Ltd., located in Singapore, was founded as a joint venture company and quickly became a leader in producing high-end CD-ROMs, which was their main product. On July 5, 2001, Star River’s current CEO resigned, and the company brought Adeline Koh to be the replacement. Star River was facing both a change in leadership, but also a shift in the market/consumer desires. Based off the scenario and circumstances previously listed, the following will cover an analysis of historical financials and project future financial forecasts, presenting thorough information to provide a variety of alternatives based on the history, forecasts, alternative options, and analyses on the strengths and weaknesses of the new CEO, Adeline Koh.

1. In the mid-1990s the market became flooded, which drove down asking price of CD-ROMs and Star River’s price points. Despite this, based only on their good reputation, Star River was able to survive the saturation of the market. However, the market was seeing a shift from CD-ROMs to DVDs, which had 14 times the storage capacity compared to CD-ROMs. A 1999 study predicted that CD shipments would fall by 41%, while the share of DVD drives would rise to 59%. At the end of 2001, Star River’s DVD sales were barely 5%. On top of all this, Star River was going through a leadership change. After looking at Star River's ratio analysis, we found that they have a somewhat concerning inventory problem. Star River's operations consist of taking out short-term debt to finance creating inventory. This shows that the inventory they are creating is becoming outdated before they are actually able to sell it. Star River’s ratios also show that they are having trouble collecting their accounts receivables. If not addressed, this can eventually lead to a cash flow problem. With the lack of cash coming in and the increase in inventories, Star River will not be able to cover their current obligations. This puts them at a very high risk for default....