Star River Electronics Case Solution Essay

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Florida Atlantic University Star River Electronics Ltd. – Case Analysis Case Summary Star River Electronics is a joint venture company that has gained respect within the industry for producing high quality CD-ROMs to major software companies. In the mid 1990s, multimedia products created a high demand for CD-ROMs, allowing manufacturing companies of all sizes to enter the market. As a result, an oversupply ensued causing prices to decline as much as 40%. Star River survived a period of consolidation, and now faced a new threat. DVDs are alternative storage devices that offered 14 times more storage capacity. Surveys showed that DVD disc drives would increase from 7% to 59% of all optical-disc-drive shipments by 2005.…show more content…
For net profit margins, ROE, and ROA, Star River experienced a declining trend of 1.22, 1.32, and 1.44 respectively from 1998 to 2001. This is due to an increase in cost of goods sold, particularly inventory, resulting in compressed margins. Star River’s inability to pay down its debt will cause EBIT and EBITDA to continue to show an increasing trend, until the company can control their Current Liabilities. |Profitability Ratios |1998 |1999 |2000 |2001 | |Gross Profit Margin |53.14% |52.08% |49.80% |49.60% | |Net Profit Margin |7.96% |8.21% |5.28%
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