Net Income Intel Financial Analysis To Accomplis
You will have to retrieve financial data for AMD and Intel from the Securities and Exchange Commission (SEC) website. The webpages with the required information may change over time so you should use the following archived links:
- Intel:
https://www.sec.gov/Archives/edgar/data/50863/0000… - AMD:
https://www.sec.gov/Archives/edgar/data/2488/00000…
Once you are on a webpage, follow the links to get the required information. For example, on the Intel page click the Item 8 link, Financial Statements and Supplementary Data. This link will take you to the part of the page with the following links, which will provide you the information you need:
- Reports of Independent Registered Public Accounting Firm
- Consolidated Statements of Income
- Consolidated Statements of Comprehensive Income
- Consolidated Balance Sheets
- Consolidated Statements of Cash Flows
- Consolidated Statements of Stockholders’ Equity etc.
The CFO suggested that you use Excel (financial analysis data in Excel) to perform a financial ratio analysis of both companies’ income statements, balance sheets, and cash flow statements for the previous three years. Your analysis needs to include the following calculations and responses (when tables are provided, you need to fill in the answers):
Question 5: Calculate the annual percentage change in revenues and net income for two years (2013 to 2014 and 2014 to 2015). Is one company growing faster than the other in revenues? (Note that as AMD makes losses, the item is written as “Net Loss” rather than “Net Income”).
| Intel | Revenue growth | Net income |
| 2013 to 2014 | ||
| 2014 to 2015 |
| Intel | Revenue growth | Net income |
| 2013 to 2014 | ||
| 2014 to 2015 |
Question 6: Calculate the following balance sheet ratios for both companies for 2014 and 2015: current ratio, quick ratio, days receivables outstanding, days inventory held, and total debt/total assets.
Note the following details to answer this question:
- For Intel, take marketable securities = short term investments + trading assets.
- For days inventory held, you need to take the average of inventory at the beginning and end of the accounting period. As you have data only for 2014 and 2015, you should only calculate days inventory held for the year 2015.
- For AMD use “cost of sales” as COGS.
- For calculating days receivables outstanding, use accounts receivable at the end of the period rather than average accounts receivable for the period.
- For “annual sales” use “net revenues.”
- You can calculate total debt for Intel = total current liabilities + long-term debt + long-term deferred tax liabilities + other long-term liabilities + commitments and contingencies, and total debt for AMD = total current liabilities + long-term debt + other long-term liabilities + commitments and contingencies.
| Intel | 2015 | 2014 |
| Current ratio = (current assets)/(current liabilities) | ||
| Quick ratio = (cash equivalents + marketable securities + accounts receivables)/current liabilities | ||
| Days receivables outstanding = accounts receivable / (annual sales/365 days) | ||
| Days inventory held = Average inventory held per day/COGS per day = ((inventory at beginning + inventory at end)/2)/(COGS/365) | X | |
| Total debt/total assets |
| Intel | 2015 | 2014 |
| Current ratio = (current assets)/(current liabilities) | ||
| Quick ratio = (cash equivalents + marketable securities + accounts receivables)/current liabilities | ||
| Days receivables outstanding = accounts receivable / (annual sales/365 days) | ||
| Days inventory held = Average inventory held per day/COGS per day = ((inventory at beginning + inventory at end)/2)/(COGS/365) | X | |
| Total debt/total assets |
Question 7: Calculate the following cash flow ratios: net income/total cash from operations and total cash from operations/total of all cash inflows for 2014 and 2015. Did the company receive a net cash inflow from financing or from sale of investments?
Note the following details to answer this question:
- Total of all cash inflows is the item “Net increase (decrease) in cash and cash equivalents.”
- Sale of investments is the item “Net cash used for investing activities.”
| Intel | 2015 | 2014 |
| Net income/total cash from operations | ||
| Total cash from operations/total of all cash inflows | ||
| Net cash in flow from financing? (Yes/No?) | ||
| Net cash inflow from sale of investments? (Yes/No?) |
| Intel | 2015 | 2014 |
| Net income/total cash from operations | ||
| Total cash from operations/Total of all cash inflows | ||
| Net cash inflow from financing? (Yes/No?) | ||
| Net cash inflow from sale of investments? (Yes/No?) |
Question 8: Calculate the following ratios using the income statement and balance sheet for two years: return on equity (net income/total shareholder equity), profit margin (net income/revenues), total asset turnover (revenues/total assets), and the equity multiplier (total assets/total shareholder equity) for 2014 and 2015. Notice that return on equity is the same as the multiplication of the next three ratios.
Note that shareholders, stockholders, and equity holders all refer to the same set of owners.
| Intel | 2015 | 2014 |
| Return on equity = net income/total shareholder equity | ||
| Profit margin = net income/revenues | ||
| Total asset turnover = revenues/total assets | ||
| Equity multiplier = Total assets/total shareholder equity |
| AMD | 2015 | 2014 |
| Return on equity = net income/total shareholder equity | ||
| Profit margin = net income/revenues | ||
| Total asset turnover = revenues/total assets | ||
| Equity multiplier = Total assets/total shareholder equity |
Conclude your analysis by answering the following questions:
Question 9: What is management’s view of the significant risks and important aspects of the business for 2015? (Note: from Item 1A, Risk Factors)
Question 10: What is the name of the accounting firm that audited the financial statements, and what was the opinion expressed for 2015? (Note: Search for the item Report of Independent Registered Public Accounting Firm.)
Question 11: Which top two members of the management team (do not include those who are only directors) were responsible for preparing and issuing the financial statements for 2015, and what were their positions in their firms? (Note: Search for the item Signatures.)
Question 12: What is management’s view on the causes of the changes in financial results for 2015? (Note: From item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations)
Before starting your calculations, review materials on data-based decision making and financial statements analysis. Also review the following topics:
- Ratios That Analyze a Company’s Short-Term Debt-Paying Ability
- Ratios That Analyze a Company’s Long-Term Debt Paying Ability
- Ratios That Analyze a Company’s Earnings Performance
- Ratio Summary
All are contained in Financial Statement Analysis. You will need to scroll to or search for these topics.
Submit your Comparative Analysis Report and Calculations to the Dropbox below. Be sure to show your calculations in Excel and provide a narrative analysis in PowerPoint. Your narrative analysis should summarize the results of your analysis and make recommendations for the benefit of the company.
After the CFO has had time to review your report, she returns it with her suggestions. She attaches a note saying, “This is a LOT of information! Would you mind summarizing your findings by answering the following questions?” Show your calculations and answer these questions for 2015 only:
Question 13: The profit margin is an indication of pricing. Does one company price lower than the other for 2014 and 2015? If so, which company?
Question 14: Does one company turn over assets faster than the other for 2014 and 2015? If so, which one? This is an indication of supply chain management and product life.
Question 15: Does one company have more debt than the other for 2014 and 2015? If so, which one? (Note: Provide answers for greater debt as a percentage of total assets and greater total dollar debt.)
Question 16: Does one company earn a greater return on shareholder investment for 2014 and 2015? If so, which one?
Question 17: Are there any significant differences between companies in balance sheet ratios for 2014 and 2015? Is one company more at risk, financially? If so, indicate which one.