The CFO’s last request was for a comparison of the financial performance of two companies in the same industry as IPS. She asked for figures on company growth, source of cash flow, return on equity, profit margin, and net revenue; and, information on issues such as management decision-making, risk factors, and recent business developments. You have decided to analyze two major publicly held companies: Advanced Micro Devices (AMD) and Intel (INTC). You will need to examine data from their Balance Sheets, Income Statements, and Cash Flow Statements.
Go to the SEC website (www.sec.gov) and locate Search Edgar for Company Filings. One by one, enter the name of each company (AMD, Intel). In the box titled Filing Type, enter 10-K and then Search to obtain annual information. The Documents heading will reveal information about the following:
important aspects of the business
management’s discussion and analysis of financial condition
results of operations
opinions of the auditor and management about controls
The heading Interactive Data will allow you to view financial statements that can be copied into Excel.
Alternatively, you can find the same information on finance.yahoo.com. The ticker symbols are AMD and INTC. Look for the items under Financials on the side left menu bar of each firm’s page.
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:
Question 5: Calculate the annual percentage change in Revenues and Net Income for three years. Is one company growing faster than the other in Revenues or in Net Income?
Question 6: Calculate the following Balance Sheet ratios for both companies for three years: Current Ratio, Quick Ratio, Days Receivables Outstanding, Days Inventory Held, Debt/Total Capital.
Question 7: Calculate the following Cash Flow Ratios: Net Income/Total Cash from Operations and Total Cash from Operations/Total of All Cash Inflows. Did the company receive a net cash inflow from Financing or from Sale of Investments?
Question 8: Calculate the following ratios using the Income Statement and Balance Sheet: 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/Shareholder Equity). Notice that Return on Equity is the same as the multiplication of the next three ratios.