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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
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?

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.

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.

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