Gemini Case Analysis

Topics: Financial ratios, Generally Accepted Accounting Principles, Financial ratio Pages: 8 (2161 words) Published: July 29, 2013
Asset Management  Parts Inventory Turnover in Days is higher than the industry average as a large proportion of parts must still be sourced from Asia due to lack of North American suppliers. Transportation raises the cost, and additional stock must be carried to guard against interruptions in the longer supply chain. This should improve in the future as the more local suppliers are developed and JIT principles are applied. WP Inventory Turnover in days is lower than industry average due to the modern, highly automated assembly line. FG Inventory Turnover in days is much lower than industry average due to the flexible nature of the assembly lines that allows it to quickly switch between the products. Also inventory can be delivered quickly to suppliers due to domestic, demand-driven production. Lower prices should also aided turnover. A/R Turnover in Days is above the industry average as the company is giving more generous trade credit to build distribution; they are a new company, and retailers are unsure of how well the products will sell. With Gemini’s success they should be able to reduce turnover to the industry domestically as the company has proven itself. A/P Turnover in Days approximates the industry average. Companies in the industry are not paying their accounts payable within 30 days and are not taking average of the early payment discount either; it is very expensive not to take advantage of these terms and could hurt creditors relations. It could be that industry practice is to ignore the specified terms of 2/10, Net 30 and to take 60 days along with discount anyway (this could explain why the industry is doing it). TV manufactures have great power in the Market than part suppliers. Due primarily to efficiencies in its FG turnover, Gemini has a cash turnover cycle which is well below the industry average; it will be difficult for the competitors to match this success without moving production to North America. Fixed Asset Turnover is well below the industry average due to Gemini’s modern, highly efficient factories and its rapidly expanding market share. The ratio fell in 2008 and 2009 because of an expansion of office place for the additional sales and administrative staff hired in 2006/07 and the construction of a new research facility at CIT in 2009; the ratio should improve as these expenditures are better utilized. Total Asset Turnover remains strong due primarily to the efficient use of Gemini’s fixed assets and Low FG inventories due to domestic production using JIT principles.

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Recommendations  Gemini should remain focused on its core business of building and selling TVS; using its new R&D centre, it must become an industry leader in 3-D technology and the use of TVs for videophone communication and web/e-mail access to defend and market its market share. Based on its 3-D expertise, Gemini should consider expanding into the production of 3-D projectors for theaters and 3-D cameras for recording TV and moving programs. Personal 3-D cameras and video recorder may also be an option, while supporting fledging 3-D TV networks is also recommended. Gemini must promote itself a lot more in the U.S. by using more TV advertising with a greater emphasis on it being a U.S.-based company. Expanding its distribution network to include smaller electronic retailers should be considered, but Gemini must be careful not to alienate its current big box distributors such as Best Buy, Costco, Sam’s Club, Wal-Mart and Target. Gemini should consider replicating its TV strategy in Europe and South America (Brazil); domestic production and part sourcing should emphasis to reduce cost and build local commitment. Cell phones and computers are very competitive industries, but Gemini may be able to build on its strengths in TV by becoming major supplier of liquid crystal displays for these products. Asia dominates its market currently, but long supply chains are of concern to U.S. computer and...
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