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Cash Flow Analysis – Signal Cable Company

In: Business and Management

Submitted By bryan096
Words 1585
Pages 7

The Signal Cable Company is a cable manufacturer for analog and digital interconnects, speaker, video and home theater cables. It is located in Tarrytown, New York. The company is well known for “highest standard in quality and customer service” and their “superior design” and “No-Hype approach resulted in one of the best price/performance ratio in the industry”.
After Signal Cable had enjoyed quite a run up in profits over the past few years, the management decided to enter in the fiber optic communications business. The market was growing, the demand increased and the competition was not too severe. Eventually, the company established two additional manufacturing facilities and increased its inventory to meet the needs.

Current Situation
Despite Signal Cable had enjoyed profits in past few years, the accounting statements showed a lower net profit margin. Furthermore, the cash balance and the stock price had fallen recently.
Jay Smith, Assistant to the President, has now the challenge to prepare some feasible answers and suggestions for his boss, Joe Mathis, who has to inform the shareholders about the current situation.

Questions of the Case Study 1. Why has the stock price fallen despite the fact that the net income has increased?
A company’s stock price is depend on its demand and supply in the stock market. There are many factors to influence an investor’s decision of buying or selling the company’s stock. Those factors such as economy of the country, government policy, company’s financial statement and so on.
Despite the Signal Cable’s income statement showed that the net income has increased, but there are some problem in its balance sheet. The main problem is the company’s increasing debts and liabilities, which caused by the recent investments in two additional manufacturing...

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