Table 1: Statement of Cash Flow of MiniScribe of 1988 and 1987
Statement of Cash Flows
Cash Flows from Operating Activities
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…
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.