Case Analysis of Star River Electronics Ltd.”

2) The higher ratio of Debt to Total Equity may result to the lower of the debt credit rating. The lower of the credit rating will result to increase of the interest rate which will cost more to the company.

Return on assets is an efficiency ratio. It compares the profits generated with the asset base required. It answers the question, how hard

Given that the cost of equity is 9.4% and the cost of debt is 12.2%, Star’s cost of capital can be calculated as 9.14% (Appendix B). The company was also considering raising the cost of debt to the industry average of 19%. At this cost of debt, Star Company would have a lower cost of capital of 8.24% (Appendix B) because interest on debt capital is deductible whereas dividend payments on equity capital are not.

Samsung served as the manufacturing industry and international company analyzed. Samsung has been in business for over 70 years and manufactures products for diverse markets, including: digital media, high -tech electronics, home appliances, information technology and telecommunication. Samsung's motto is to "inspire the world and create the future" by leveraging three key strengths: new technology, innovative products and creative solutions.

Hewlett Packard (HP) decided to produce 1.3-inch disk drives to become the market leader in a new market and increase HP’s revenue. Although the market for 1.3-inch disk drives was still unclear and still developing, HP decided to organize a special team to develop this new product. This group was multi-talented, with the best engineers from every department in the company. The group also had many priorities for the company. However, things didn’t develop as the Kittyhawk team expected. They failed to sell the new product to the customer they planned. Even though some new customers were interested in this

Star River’s current ratio indicates that it cannot cover its current obligations totally with its current assets. Low values (less than 1), however, do not indicate a critical problem. If an organization has good long-term prospects, it may be able to borrow against those prospects to meet current obligations.

Return on Total Assets was 4.43% which is below five percent. That indicates that the company is not accurately converting its assets into profit. The total for Return on Stockholders’ Equity was 8.89%, however financial analysts prefer ROE to range between 15-20 %. The company’s low ROE indicates that the company is not generating profit with new investments. Lastly, Debt-to-Equity ratio for the company was 1.01 which indicates that investors and creditors are equally sharing assets. In the view of creditors, they see a high ratio as a risk factor because it can indicate that investors are not investing due to the company’s overall performance. The totals of these three ratios demonstrate that the company’s financial state is not as healthy as it should be.

Hartley Electronics Ltd is a well-established company that has been trading since 1977. It has a good technical, financial and marketing section, but its human resources have been neglected, which has led to some problems within the company.

Star River Electronics is a joint venture between England’s Starlight Electronics Ltd. and an Asian venture-capital firm, New Era Partners. Star River Electronics is based in Singapore, and its mission was to manufacture CD-ROMs as a supplier to major software companies. Star River Electronics has gained fame in the industry for producing high quality discs.

By the end of 2012, Samsung electronics become the largest producer of televisions and mobile phone. In order to achieve the success and the dramatic rise in consumer electronics sector, the company initiated new methods to innovate and create high quality products .

The Debt-Equity Ratio shows that most of the capital was in terms of ordinary shares and is becoming more reliant on Shareholders Equity than on debt to finance operations.

A key area of exploitation for the company has been its experience and research based historic past. The current CEO of MediaTek, Ming-Kai Tsai had worked as a designer manager of the electronic research and service organization at Taiwan’s Industrial Technology Research Institute (ITRI). When Tsai joined UMC in 1983 he became director of research and development and oversaw the creation of many products. He took the necessary steps to make the company a top CD-ROM controller supplier. Having an experienced leadership with a past in R&D has proved to be a strong capability for MediaTek. They have managed to take advantage of this by diversifying their product lineup to target various CD, DVD, and Blu-ray technologies.

The capitalization ratio compares the debt portion of the company’s capital structure and the equity part and is expressed in percentage terms. While evaluating company, keep in mind that a lower percentage means a healthy equity and is more desirable.

The Debt to Equity Ratio reviews financial leverage of a company by determining how much of their equity and debt is used by the company to finance its assets. The closer the number to one (1), the more leveraged a firm is. (Investopedia, 2008). IBM shows a very modest 3.23 for 2007 and 2.62 for 2006 versus the highly leveraged Microsoft, showing 1.03 in 2007 and .74 in 2006. Highly leveraged companies are more of a risk than modestly leveraged companies. In times of economic stress, the higher leveraged company could see reduced sales/revenues and be unable to cover liabilities. However, a more highly leveraged company will also likely do better than a modestly leveraged company when sales boom. By reviewing the trends, both companies were more leveraged in 2007 over 2006. Both companies may chose to increase assets in 2007 in an effort to increase shareholder wealth.

Last year, the company had to sell its DVD player business to the Hitachi Group in order to generate money to support the latest television series which turned out to be a big flop to the company. In the past, the company was used to be very adaptable to several business obstacles whether it is financial crisis or threat from newcomers. But nowadays, Sawasdee Media, who ever was the number one of largest television manufacturer in Thailand, is losing its title after a poor