Abstract |
Chi Mei Optoelectronics closed a three-way merger with panel makers Innolux Display Corp and TPO Displays Corp in March 2011, and the resulting company is named Chimei Innolux Corp., as the island's largest producer of liquid crystal displays (LCDs). The key point about maintaining the stability of TFT-LCD industry is to remain stable cash flow. The study is to analyze the effects between free cash flows and enterprise value based on each financial statement. As a result, the first finding of the study on profitability and bargaining power reveals that economic prospect will affect gross profit ratio, and since the bargaining power of suppliers is better than buyers after merge, the growth of accounts receivable and accounts payable will cause cash flow volatility. Secondly, on operating pattern, marketing and R&D investment, because the key technology and materials are controlled by Japan and Korea, the cash flows from operating activities will collapse down sharply under the variation of economic. Thirdly, on internal operating efficiency, the inventory management works normally owning to the inventory turnover ratio is lower than before after merge. Fourthly, on assets utilization, with the decrease of investment in new factory, the asset turnover ratio is getting better. In conclusion, the positive free cash flow makes Chimei Innolux Corp. a sustainable development. |