Annual reports provide significant information about an organization’s capital budget and capital budgeting process. Intel Corporation provides financial reports for several years at www.intel.com (About Intel → Investor Relations → Financials and Filings → Annual Report). This exercise will require you to use Intel’s consolidated statements of cash flows, management’s discussion and analysis of financial condition and results of operations, and notes to the consolidated financial statements for the most recent year presented.
Required:
Using Intel’s most recent annual report, answer the following:
a. From Intel’s consolidated statements of cash flows:
1. Identify the amount of capital expenditures from the investing activities section. How much were the additions to property, plant, and equipment? How much were the acquisitions, net of cash acquired?
2. How do these amounts compare to the previous two years? Comment on the trend relative to the general cash flow position for each year.
b. Read Intel’s management’s discussion and analysis of financial condition and results of operations.
1. In the Strategy section, what information is provided about the Intel capital program?
2. In the Critical Accounting Estimates section, describe how Intel assesses the impairment of long-lived assets.
3. In the Liquidity and Capital Resources section, how were investing cash flows used for capital expenditures?
4. In the Business Outlook section, describe Intel’s capital spending plan for the next year.
c. From Intel’s notes to the consolidated financial statements, determine the following:
1. How does Intel value and depreciate property, plant, and equipment?
2. If applicable, describe Intel’s acquisitions for the year.
3. If applicable, describe Intel’s divestitures for the year.
d. From Intel’s selected financial data, do the following:
1. For the five years presented, calculate the ratio of additions to property, plant, and equipment to net revenue.
2. For the five years presented, calculate the ratio of net investment in property, plant, and equipment to total assets.
3. Comment on the trends.