256 CHAPTER 5 The Analysis of Financial Statements CASES Case 5.1 Intel Case The 2013 Intel Annual Report can be found at the following Web site: www.pearsonhighered.com/fraser. Using the annual report, answer the following questions: (a) Using the Intel Annual Report, calculate key financial ratios for all years presented. (b) Using the library, find industry averages to compare to the calculations in (a). (c) Write a report to the management of Intel. Your report should include an eval- uation of short-term liquidity, operating efficiency, capital structure and long- term solvency, profitability, market measures, and a discussion of any quality of financial reporting issues. In addition, strengths and weaknesses should be identified, and your opinion of the investment potential and the creditworthi- ness of the firm should be conveyed to management. Hint: Use the information from the Intel Problems at the end of Chapters 1 through 4 to complete this problem. 15.2 Case 5.1 Using the Intel Annual Reports, calculate the 2010 key financial ratios. Omit the shaded areas 2013 2012 2011 Ind. Avg. 2.2 1.2 2.43 2.06 2.87 27 days 86 days 55 days 58 days 46 days 70 days 44 days 72 days 13.92 4.26 6.68 1.91 0.63 5.2 8.3 15.2 1.5 Short-term liquidity Current ratio Quick ratio Cash flow liquidity ratio Average collection period Days inventory held Days payable outstanding Cash conversion cycle Operating efficiency Accounts receivable turnover Inventory turnover Accounts payable turnover Fixed asset turnover Total asset turnover Leverage Debt ratio Long-term debt to total capitalization Debt to equity Financial leverage index Times interest earned Cash interest coverage Fixed charge coverage Cash flow adequacy** Profitability Gross profit margin Operating profit margin Net profit margin Cash flow margin Return on total assets Return on equity Cash return on assets 49.70% 1.1 39.30% 20.42% 0.65 1.64 163 times 322 times 49 times 1.22 times 8.2 times 426 times N/M 81 times 1.41 times 62.15% 27.44% 20.63% 35.40% 13.05% 21.49% 22.39% 62.51% 32.37% 23.97% 38.82% 28.70% 1.60% includes trading assets **includes short-term debt 11,005 3 12,942 470 (26) holding gains (losses) on Wanable-lor-sale investments Change in net deferred tax evaluation allowance Change in net unrealized holding gam e s) on derivatives Change in net prior service costs Change in actuarial valuation Change in net foreign currency translation adjustment Other comprehensive Income (loss) Total comprehensive income See accompanying notes (170 199) (9) (119) (172) 1.642 382 (588) (142) (1,114) 11.828 $ 11.262 $ 11,387 $ Table of Contents INTEL CORPORATION CONSOLIDATED BALANCE SHEETS $ 5,674 5.972 8,441 B.478 3.999 5.685 December 28, 2013. december 29, 2012 In M onsExcept Par Val Assets Current assets Cash and cash equivalents Short-term investments Trading assets Accounts receivable, net of allowance for doubtful accounts of $38 ($38 in 2012) Inventories Deferred tax assets Other current assets Total current assets Property, plant and equipment, net Marketable equity securities Other long-term investments Goodwill Identified intangible assets, net Other long-term assets Total assets Liabilities and stockholders' equity Current liabilities: Short-term debt 3,582 4,172 2594 1.649 -32,084 31,428 6.221 1.473 10,513 5,150 5,489 92,358 3833 4.734 2.117 2,512 31,358 27,983 4.424 493 9,710 6,235 4,148 84,351 $ $ $ 281 $ 312 2,969 3,123 1,021 2,096 4,078 13,568 13,165 4,397 2,972 3,023 2,972 1,015 1,932 3,644 12,898 13,136 3,412 3,702 - Accounts payable Accrued compensation and benefits Accrued advertising Deferred income Other accrued liabilities Total current liabilities Long-term debt Long-term deferred tax liabilities Other long-term liabilities Commitments and contingencies (Notes 18 and 26) Stockholders' equity: Preferred stock, $0.001 par value, 50 shares authorized: none issued Common stock, $0.001 par value, 10.000 shares authorized: 4,967 issued and outstanding (4.944 issued and outstanding in 2012) and capital in excess of par value Accumulated other comprehensive income (loss) Retained eamings Total stockholders' equity Total liabilities and stockholders' equity See accompanying notes. 21,536 1,243 35,477 58,256 92,358 $ 19,464 (399) 32,138 51,203 84,351 $ Table of Contents INTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Three Years Ended December 28, 2013 2013 (in Millions) $ 8,478 2012 5,065 2011 5,498 $ $ 256 CHAPTER 5 The Analysis of Financial Statements CASES Case 5.1 Intel Case The 2013 Intel Annual Report can be found at the following Web site: www.pearsonhighered.com/fraser. Using the annual report, answer the following questions: (a) Using the Intel Annual Report, calculate key financial ratios for all years presented. (b) Using the library, find industry averages to compare to the calculations in (a). (c) Write a report to the management of Intel. Your report should include an eval- uation of short-term liquidity, operating efficiency, capital structure and long- term solvency, profitability, market measures, and a discussion of any quality of financial reporting issues. In addition, strengths and weaknesses should be identified, and your opinion of the investment potential and the creditworthi- ness of the firm should be conveyed to management. Hint: Use the information from the Intel Problems at the end of Chapters 1 through 4 to complete this problem. 15.2 Case 5.1 Using the Intel Annual Reports, calculate the 2010 key financial ratios. Omit the shaded areas 2013 2012 2011 Ind. Avg. 2.2 1.2 2.43 2.06 2.87 27 days 86 days 55 days 58 days 46 days 70 days 44 days 72 days 13.92 4.26 6.68 1.91 0.63 5.2 8.3 15.2 1.5 Short-term liquidity Current ratio Quick ratio Cash flow liquidity ratio Average collection period Days inventory held Days payable outstanding Cash conversion cycle Operating efficiency Accounts receivable turnover Inventory turnover Accounts payable turnover Fixed asset turnover Total asset turnover Leverage Debt ratio Long-term debt to total capitalization Debt to equity Financial leverage index Times interest earned Cash interest coverage Fixed charge coverage Cash flow adequacy** Profitability Gross profit margin Operating profit margin Net profit margin Cash flow margin Return on total assets Return on equity Cash return on assets 49.70% 1.1 39.30% 20.42% 0.65 1.64 163 times 322 times 49 times 1.22 times 8.2 times 426 times N/M 81 times 1.41 times 62.15% 27.44% 20.63% 35.40% 13.05% 21.49% 22.39% 62.51% 32.37% 23.97% 38.82% 28.70% 1.60% includes trading assets **includes short-term debt 11,005 3 12,942 470 (26) holding gains (losses) on Wanable-lor-sale investments Change in net deferred tax evaluation allowance Change in net unrealized holding gam e s) on derivatives Change in net prior service costs Change in actuarial valuation Change in net foreign currency translation adjustment Other comprehensive Income (loss) Total comprehensive income See accompanying notes (170 199) (9) (119) (172) 1.642 382 (588) (142) (1,114) 11.828 $ 11.262 $ 11,387 $ Table of Contents INTEL CORPORATION CONSOLIDATED BALANCE SHEETS $ 5,674 5.972 8,441 B.478 3.999 5.685 December 28, 2013. december 29, 2012 In M onsExcept Par Val Assets Current assets Cash and cash equivalents Short-term investments Trading assets Accounts receivable, net of allowance for doubtful accounts of $38 ($38 in 2012) Inventories Deferred tax assets Other current assets Total current assets Property, plant and equipment, net Marketable equity securities Other long-term investments Goodwill Identified intangible assets, net Other long-term assets Total assets Liabilities and stockholders' equity Current liabilities: Short-term debt 3,582 4,172 2594 1.649 -32,084 31,428 6.221 1.473 10,513 5,150 5,489 92,358 3833 4.734 2.117 2,512 31,358 27,983 4.424 493 9,710 6,235 4,148 84,351 $ $ $ 281 $ 312 2,969 3,123 1,021 2,096 4,078 13,568 13,165 4,397 2,972 3,023 2,972 1,015 1,932 3,644 12,898 13,136 3,412 3,702 - Accounts payable Accrued compensation and benefits Accrued advertising Deferred income Other accrued liabilities Total current liabilities Long-term debt Long-term deferred tax liabilities Other long-term liabilities Commitments and contingencies (Notes 18 and 26) Stockholders' equity: Preferred stock, $0.001 par value, 50 shares authorized: none issued Common stock, $0.001 par value, 10.000 shares authorized: 4,967 issued and outstanding (4.944 issued and outstanding in 2012) and capital in excess of par value Accumulated other comprehensive income (loss) Retained eamings Total stockholders' equity Total liabilities and stockholders' equity See accompanying notes. 21,536 1,243 35,477 58,256 92,358 $ 19,464 (399) 32,138 51,203 84,351 $ Table of Contents INTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Three Years Ended December 28, 2013 2013 (in Millions) $ 8,478 2012 5,065 2011 5,498 $ $