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We recommend that Scientific Technology Company implement several immediate cost-cutting measures in order to improve their short-term financial position allowing the company to remain competitive in the current marketplace as well as to ensure future viability in the ATE and VLSI industries. We recommend that Scientific Technology Company immediately shut down its Arizona manufacturing plant. The shutdown and sell off of the fixed assets from the Arizona plant will provide the company with a cash infusion of approximately $21 million. We advise Scientific Technology Company to use this cash infusion to pay towards the $25 million the company has in long-term debt. We also recommend that Scientific Technology Company sell off the $28.33 million in inventories from the Arizona plant. This sell off would bring the company’s Inventories as a % of COGS to 55.45%, which is closer to Scientific Technology’s competitors 48-50% range. The company’s Total Assets as a % of Sales would decrease to 84.88% if these recommendations are implemented. The approximately $50 million dollar savings would decrease COGS to a projected $71 million in 1985 or 24% of sales. These changes would produce an estimated 21.21% return on total assets, an increase from the estimated 16.94% had the Arizona plant remained open. These changes would change 1985 projected EPS from $1.45 to 3.41. With these proposed changes, we also recommend that Scientific Technology Company improve its accounts receivable policy so a decrease in the company’s current ratio doesn’t occur. In order to see a quick reduction in the estimated accounts receivable going forward we recommend that Scientific Technology Company offer a 2-3% discount to its customers who pay within a 30-day period. We also recommend that for its financial projections going forward, the company limits its accounts receivables

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