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Financial Statement Analysis

University: University of London

  • Unit No: 7
  • Level: High school
  • Pages: 24 / Words 5965
  • Paper Type: Assignment
  • Course Code: N/A
  • Downloads: 389
Question :

This sample will let you know about:

  • What is Financial Analysis?
  • Explain Industrial Analysis.
  • How can you evaluate the financial status of the company?

 

Answer :
Organization Selected : N/A

INTRODUCTION

Financial analysis refers to assessment of the financial health and position of company. It is not only confined to the financial figures but also with the non financial information. These information helps in identifying the other factors influencing the business. Non financial also have importance in the business and it is to be dealt appropriately. Performance of the company is assessed using ratio analysis that provides the information about the company and its performance. The report is about the Intel corporation and focusing over the assessment of company  and its financial position.

Financial Analysis of Comparing Intel with peer competitors ADM 

FINANCIAL ANALYSIS

 

 

Intel

AMD

Liquidity ratio

 

 

Current assets

28787

3540

Current liability

16626

1984

Current ratio

1.73

1.78

Current assets / current liabilities

 

 

 

 

 

Current assets

28787

3540

Inventory

7253

845

Current liability

16626

1984

Liquid ratio

1.30

1.36

Current assets - (stock + prepaid expenses)

 

 

 

 

 

Activity ratio

 

 

Trade Receivables

6722

1235

Sales

70848

6475

Account receivable turnover ratio

9.49%

19.07%

 

 

 

 

 

 

Sales

70848

6475

Net Assets

111337

2572

Asset turnover ratio

63.63%

251.75%

Sales / Net assets

 

 

 

 

 

Profitability ratio

 

 

Employed Capital

111337

2572

Net operating profit

23316

451

Return on capital employed

20.94%

17.53%

Net operating profit/Employed Capital

 

 

 

 

 

Net Income

23316

451

Shareholder's Equity

74563

1266

Return on Equity

31.27%

35.62%

Net Income / Shareholder's Equity

 

 

 

 

 

Cost of Sales

27111

4028

Sales

70848

6475

Gross Margin

61.73%

37.79%

Total Sales - COGS/Total Sales

 

 

 

 

 

Operating profit

23316

451

Sales

70848

6475

Operating profit ratio

32.91%

6.97%

Operating Income/ Net Sales

 

 

 

 

 

Debt

 

 

Debt

25098

1114

Equity

74563

1266

Debt equity ratio

33.66%

87.99%

Debt/ Equity

 

 

Revenue forecast of company using the statistical and economical tools.

Statistical Analysis of the revenues

Net Revenue

 

29.4

#N/A

33.7

#N/A

26.5

29.8666666667

30.1

30.1

34.2

30.2666666667

38.8

34.3666666667

35.4

36.1333333333

38.3

37.5

37.6

37.1

35.1

37

43.6

38.7666666667

54

44.2333333333

53.34

50.3133333333

52.71

53.35

55.87

53.9733333333

55.36

54.6466666667

59.39

56.8733333333

62.76

59.17

70.85

64.3333333333

 Economic tool for revenue forecast of company.

The economic forecasts has been done using regression because it helps in predicting the forecasts. It is used for predicting the revenues of company based on information of last of seven years.

SUMMARY OUTPUT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regression Statistics

 

 

 

 

 

 

 

Multiple R

0.999999655

 

 

 

 

 

 

 

R Square

0.9999993099

 

 

 

 

 

 

 

Adjusted R Square

0.9999958596

 

 

 

 

 

 

 

Standard Error

13.0898380122

 

 

 

 

 

 

 

Observations

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANOVA

 

 

 

 

 

 

 

 

 

df

SS

MS

F

Significance F

 

 

 

Regression

5

248301592.656141

49660318.5312282

289828.411518734

0.0014102402

 

 

 

Residual

1

171.3438591855

171.3438591855

 

 

 

 

 

Total

6

248301764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept

184.7257951862

78.4295338098

2.3553091063

0.255608367

-811.8159187635

1181.2675091358

-811.8159187635

1181.2675091358

Cost of Sales

0.9976664698

0.0055208607

180.7085022379

0.0035228739

0.9275172833

1.0678156563

0.9275172833

1.0678156563

Gross profit

1.0075141212

0.0093868045

107.3330243866

0.0059310856

0.8882434608

1.1267847815

0.8882434608

1.1267847815

Operating Expenses

-0.0162976206

0.0084978767

-1.9178462119

0.3059817558

-0.1242733818

0.0916781405

-0.1242733818

0.0916781405

Operating Income

0.0018766325

0.0023576343

0.7959811381

0.5720096892

-0.0280799519

0.0318332168

-0.0280799519

0.0318332168

Earnings before taxes

-0.0069559982

0.0068363765

-1.0174978207

0.4944787156

-0.0938203973

0.079908401

-0.0938203973

0.079908401

Equation = Y  = a + bx       

Application of Regression

In order to apply regression firstly dependent and independent variables are identified. Dependent variable is revenue and independent variables are COS, gross profit margin, operating expenses, operating income and earnings before tax. Get Assignment Writing Help from our experts!

For applying regression we scroll data tab of excel and then select regression, from data analysis option. In the dialogue box revenues are taken as variable Y and others as X variable. 95% was CI.

Revenue Forcasts

Cost of Sales

23692

Gross profit

39098

Operating Expenses

21048

Operating Income

18050

Earnings before taxes

20352

Revenue 

62762

 

X

 

Cost of Sales

23692

Gross profit

39098

Operating Expenses

21048

Operating Income

18050

Earnings before taxes

20352

 

 

Y

 

Revenue forecast considering cost of Sales

23821

Gross profit Revenue forecast considering cost of Sales

39577

Operating Expenses Revenue forecast considering cost of Sales

-158

Operating Income Revenue forecast considering cost of Sales

219

Earnings before taxes Revenue forecast considering cost of Sales

43

Industry analysis

Porter's five forces model is used for industry analysis of Intel company. The model helps in analysing the dimensions of power with respect to challenges and engaging quality of business (Pandey, Tesfay and Jarso,  2018). Five forces shows the significant external factors contributing to intensities of five forces affecting industry environment of company.

Current Entrants

From view points of the Microprocessor, only critical single contender would preserve that is AMD.  After beating the other chip engineer, that are NexGen and Cyrix. Challenge for  Intel will be generating  primarily from designers of Thunderbird, Athlon & Sledgehammer CPUS's.

Purchasers

Buyers include family unit PC designers and imitator shops creating unique and properly designed machines. Big producers like HP and Dell will figure for tremendous chipset &  microchip influences. Purchasers of the industry are diverting consecutively, but yet  company is having honourable considerations from various producers.

Providers

It can be accepted, that providers of organisation will be having distinguishable deficiencies in capacity for selling from the other brokers of product in innovation gearing industry (Slavchev and Margenov,  2017). Most required segment in Intel can be acquired individually from progression of the producers.

Potential Contestants

It is just focused  over locating the potential one in right way. Assembling and crating chipsets and microchips will be requiring gigantic consumption, insuperable passage boundaries practically for any organisation desiring to join fight. Those organisations who are considering to enter industry are required to consider the controls that are promoted by Intel.

Potential Substitutes

Organisations only fight in condition of short figures when focused server is produced by particular organisations. It could be conceived that coordinating Windows/ Intel machines with Sun/Unix machines is wrong.  Though the fact about the challenge among the Intel and item purchasing organisations, Intel is stressed only towards the substitution generating from AMD (Stegailov and Vecher,  2017). Want to get Assignment Samples.Talk to our Experts!

Evaluation of financial status and prospects of company.

Evaluating the financial status of prospects of company using ratio analysis of company for last three years.

 

2018

2017

2016

Liquidity ratio

 

 

 

Current assets

28787

29500

35508

Current liability

16626

17241

20302

Current ratio

1.73

1.71

1.75

Current assets / current liabilities

 

 

 

 

 

 

 

Current assets

28787

29500

35508

Inventory

7253

6983

5553

Current liability

16626

17241

20302

Liquid ratio

1.30

1.31

1.48

Current assets - (stock + prepaid expenses)

 

 

 

 

 

 

 

Activity ratio

 

 

 

Trade Receivables

6722

5607

4690

Sales

70848

62761

59387

Account receivable turnover ratio

9.49%

8.93%

7.90%

 

 

 

 

 

 

 

 

Sales

70848

62761

59387

Net Assets

111337

105828

93025

Asset turnover ratio

63.63%

59.30%

63.84%

Sales / Net assets

 

 

 

 

 

 

 

Profitability ratio

 

 

 

Employed Capital

111337

105828

93025

Net operating profit

23316

17936

12874

Return on capital employed

20.94%

16.95%

13.84%

Net operating profit/Employed Capital

 

 

 

 

 

 

 

Net Income

21053

9601

10316

Shareholder's Equity

74563

69019

66226

Return on Equity

28.24%

13.91%

15.58%

Net Income / Shareholder's Equity

 

 

 

 

 

 

 

Cost of Sales

27111

23692

23196

Sales

70848

62761

59387

Gross Margin

61.73%

62.25%

60.94%

Total Sales - COGS/Total Sales

 

 

 

 

 

 

 

Operating profit

23316

17936

12874

Sales

70848

62761

59387

Operating profit ratio

32.91%

28.58%

21.68%

Operating Income/ Net Sales

 

 

 

 

 

 

 

Debt

 

 

 

Debt

25098

25037

20649

Equity

74563

69019

66226

Debt equity ratio

33.66%

36.28%

31.18%

Debt/ Equity

 

 

 

The above analysis shows the financial status and prospects of company more accurately. The financial prospects  refers to the performance of the company during the years. Whether the company is having adequate performance during the years or not can be analysed using the financials of company.

The performance of company can be analysed using profitability ratios. It shows the effectiveness of company in using its resources and generating maximum benefits to the organisation.

Return on Capital Employed

 It can be judged that the improvements strategies has helped the company in gaining competitive advantages. Returns of company have constant growth in its return over the capital employed (Annual Reports Intel, 2019). Company is using its resources effectively for maintaining its sustainable growth. Company  with high returns over capital reflects the leadership and strong control over managing the operations of company (Wagner,  and et.al., 2017). This is essential for the business enterprise to have strong control and monitoring over its activities for generating required rate of returns.

Return on Equity

Return over equity shows that company is having has made a come back after the decline in last year with drastic improvements. The return over equity of company has became more tha double. Return has been generated with the equity issue by the company. Company every year increases its equity with increase in its return. Returns reflects the efficiency of performance, high returns  create more demands for company share increasing its prices. Increased share prices are useful in maximising the shareholder's wealth.

Gross profit margin

It is used in analysing the management of  costs of company in manufacturing software. Cost of sales of company are being managed appropriately considering the cost influential factors. Companies is continuously expanding its dimensions that can be seen through its growth in revenues. It is having high gross margins during the last three years.

Operating profit margin

It shows the income generated from the business. Company is having high returns against its revenues. The operational and other expenses of company are being managed effectively by the business organisation. The executives have monitored the various cost operations for keeping them under control.

Liquidity Ratio

The liquidity strength of company can be judged by the current and  quick ratios. Company along with high returns should also have strong liquidity position for repayment of the short term  obligations. Company is not having a strong liquidity position as its current ratios are not above the standard of 2:1. Company along with returns should also focus over strengthening its liquidity position. This will also help in improving its quick ratio.

Activity Ratio

The ratio highlights that the revenues against its assets are adequate. The asset turnover of company is not significant high. Company can more adequately use its assets for generating more revenues. Though company is having effective management of its operations it is required to focus over effective utilisations of its assets.

Debt Equity Ratio

Debt equity ratio represents the financial risk associated with the company. There should be appropriate  mix of debt and equity for having adequate capital structure with minimum cost of capital. Company uses debt for financing its projects and investments and is not dependent only over the equity investments . Company should not further increase its debts as it will be  increasing the finance costs for company. Get online Finance Essay Help to boost your grades!

Competitive analysis in which company is operating.

A competitive analysis is a strategy where company identify major competitors and research their products, sales, and marketing strategies. Analysis of various functions of Intel is been discussed below:

Marketing: Intel has revised their market strategy, company is being engaged in following content marketing strategy where they target tech enthusiast, create brand loyalty, and revitalized brand. They are widely making use of e-commerce to provide products and services to consumers. In order analyze needs and demands of consumers they are engaged in doing marketing research. This aspect can help Intel in gaining competitive advantage.

Technology: Intel is getting involved in making us of updated technology, its latest chip is being designed for providing computing edge. This chip can be useful for 5G network services that will be installed in smartphone. Updated technology has enhanced attraction of consumer towards company and this will help firm in increasing their market share.

Financial: Intel make sure that adequate resources are available to finance department of company. Also most of the revenue is been generated by company through selling out products and services to end consumers (Ganzha, and et.al., 2019). They also receive income form license agreement primarily with MacAfee. Recognition of revenue is area of accounting flexibility.

Human resource: In order to grow, Intel has been engaged in providing training to employees so that they can enhance worker's skills and abilities. It has also been involved in motivating employees to perform to their full potential that increases their job performance and make company more productive. This can also help Intel in gaining competitive advantage.

SWOT analysis of Intel

Strength: 

Intel has market share of over 85%, they have control over entire networking process. Company is making use of updated technology. They are also bringing out advanced chip with increased efficiency. Intel also have good reputation and strong brand recognition. They have high consumer loyalty and also company has highly engaged staff which is supporting their growth.

Weakness:

It has been analyzed that Intel is not being engaged in providing safe and secure environment to their consumers. Unexpected changes in environment also have negative impact on working of Intel. They are hugely dependent on their three customers which is Hewllet, Packard and Dell. Also it has been analyzed that organization needs to diversify their market.

Opportunities:

Intel has the opportunity to expand its business beyond its traditional business. They have various options to grow like for example home health and tele health monitoring. Also it has been analyzed that Intel can implement cloud computing infrastructure. They can gain huge benefits from growing and emerging market (Jouppi,  and et.al., 2017). Also they can engage in providing high quality service to consumers which is really necessary and can act as opportunity for their growth.

Threats:

They have huge threat from their competitors. Also changes in technology can occur as threat to them, as Intel has to implement new trends in order to grow. They are also facing various issues related to antitrust and unfair business practice which needs to be stopped by company as this can hamper their growth.

Leadership analysis

Success and growth of every company is dependent on the leaders. The intel  has achieved successive growth in the market due to its strong executive leaderships. Company only has 6 CEO's in its till the year tenure (Moharana,  Singh,  and Dell,  2017).

Krzanich became CEO in 2013, when company was having a declining phase in market of PC which was contributing above 60% of the revenues of company. Challenge was of shifting the company from PC centric to data centric corporation. At the time of taking leadership he was already leader in microprocessor technology with strong profits & cash flows. The declining approach.

The leader helped the company in building strong fast growing artificial intelligence & autonomous vehicle market. The leaders through advanced ideas and technology had brought the company to stable growth and profitability status (Kosturski,  Margenov and Vutov,  2017). Company has strong leaders that helped in managing the cost and operations with boosting employee morale (Leadership at Intel, 2019).

CONCLUSION

The above study shows that company that Intel is having strong performance in the market. It is performing adequately achieving the growth and success. Though company had faced some issues in the PC markets. The effective leadership of executives helped the company in maintaining its market share with sustainable growth and high returns. Company will be having rise in revenues that can be judged by its revenues forecasts.

Read Also- Operation Management

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