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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
• risk factors
• management’s discussion and analysis of financial condition
• results of operations
• opinions of the auditor and management about controls
• financial statements

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.

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?

Question 10: What is the name of the accounting firm that audited the Financial Statements and what was the opinion expressed?

Question 11: Which members of the management team were responsible for preparing and issuing the Financial Statements?

Question 12: What is management’s view on the causes of the changes in financial results?

Before starting your calculations, review materials on data-based decision making and financial statements analysis. Also review the 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 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.

Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them in your work.

• 3.1 Identify numerical or mathematical information that is relevant in a problem or situation.
• 3.2 Employ mathematical or statistical operations and data analysis techniques to arrive at a correct or optimal solution.
• 3.3 Analyze mathematical or statistical information, or the results of quantitative inquiry and manipulation of data.
• 3.4 Employ software applications and analytic tools to analyze, visualize, and present data to inform decision-making.
• 10.1 Apply relevant microeconomics principles to support strategic decisions for the organization.
• 10.2 Analyze financial statements to evaluate and optimize organizational performance.