MinScribe case

4104 words 17 pages
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


Statement of Cash Flows

Cash Flows from Operating Activities

Net Income


Non-Cash Adjustments

Changes in Assets and Liabilitites Related to Operations

Change in Accounts Receivable

Change in Inventory

Change in Account Payable

Change in Accruals


Net Cash Flow from Operating Activities


Cash Flows from Investing Activities

Change in PP&E

Change in Other Assets


Net Cash Flow from
…show more content…

But as a whole, MiniScribe’s performance of managing and replacing its inventory was above the industry average level.
2) Receivable Turnover
Accounts receivable turnover is calculated as sales divided by average gross accounts receivable. It measures the number of times on average receivables are collected during the period and a company’s ability to efficiently issue credit to its customers and collect it back in a timely manner.
Chart 5: Comparison of Receivable Turnover Ratio between MiniScribe and Industry

According to the chart above, obviously, MiniScribe’s efficiency of collecting its receivables varied greatly from 1986 to 1988. In 1986 and 1987, the receivable turnover of MiniScribe were 4.6 and 6.3, both were above the industry median. The ratios also means that MiniScribe collected its account receivables at an average 79.34 days in 1986 and 57.93 days in 1987. But the high ratio in 1987 might indicate that the firm’s credit policy is too rigorous, which might be hampering sales. However, in 1988, the ratio decreased dramatically to 3.5, indicating that MiniScribe had difficulty to collect its receivables from customers. The average collection period in 1988 was more than 104 days. Too much capital is tied up in asset in 1988 and thus company’s liquidity may be influenced.
3. Payable Turnover
The Payables Turnover ratio measures how many times per period the company pays its average payable amount.