Abstract
Different companies give varying financial reports depending on the performance within the stipulated fiscal year. Various financial reports help in the assessment of the financial health of a company, while the results therein can aid in making recommendations on how to improve the financial health within the said company. This paper examines the financial reports at Intel Inc, where it analyses the disclosures and quality earnings at Intel Inc coupled with a veering through the statements of cash flows. The paper also looks at the turnover measures, the ROA, the ROE and the steps that the company uses to prepare for a projected income statement and its projected balance sheet. The paper will also analyze the liquidity and solvency at Intel Inc apart from recasting the company’s income statement and making judgments on the hypothesis.
Analysis of the Balance Sheet
The current assets at Intel Inc are considered as the total number of the carrying amounts in the balance sheet within a stipulated date of the assets which are expected to be either gained, sold or consumed within the normal operating cycle, and which is basically one year. The assets are considered as the probable future economic benefits that are gained and controlled by one or more entities in response to a business transaction in the past. In this regard, the current assets at Intel declined from 2013 to 2014, although there was an economic recovery in 2015, where the current assets increased within the 2014-2015 financial year. This means that the increase in the current assets in 2014-2015 exceeded the 2013 level ( Johnson & Xie, 2015). For instance, the total value for the current assets at Intel by Dec 2015 stands at $ 40.356 billion, while the value for the current assets recorded by Dec 2014 was $ 27.73 billion. The current assets value standing for the year 2013 was recorded as $ 32.08 billion, where there was a decline in 2014 and a recovery in 2015. A summary of the current assets is shown in the figure below.
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Annual Income Statement (values in 000's)
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Figure 1- current assets
The current liabilities at Intel are considered as an obligation payable to creditors within a period of one year. The current assets include the accounts payable, which increased from the year 2012 to 2014, but declined in 2015, while the shorter debts within the company declined consistently from 2012 to 2014 and increased in 2015, although the increase did not exceed the 2012 margin. Other current liabilities increased consistently from 2012 to 2014, and then they rose in 2015 by a margin that did not exceed the 2014 total value of other current liabilities ( Ghetie, 2012).
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The total value of current liabilities at Intel Inc increased from 2012 to the year 2014, while it declined in 2015. The total value of the current liabilities at the company in was $12.9 billion in 2012, while the value for 2013 was $13.6 billion. The total current liabilities for the year 2014 were $16.01 billion, while this figure was high above the total current liabilities value for 2015, which was $ 15.66 ( Ghetie, 2012). The decline in the total current liabilities was as a result of the decline in the value of the accounts payable.
The liquidity ratios at Intel give a varied scale of results, where these ratios are dependent on the value of the current assts and the current liabilities. For instance, the current ratio, which is the ratio between the current assets and the current liabilities, shows that at Intel, this ratio deteriorated from the year 2013 to the year 2014, although an improvement was exhibited in the year 2015, where the ratio exceeded that for 2013. The quick ratio also gives how the liquidity ratio can be calculated as a quotient between the sum of all cash, short-term marketable investments and receivables on one hand and the current liabilities on the other ( Ghetie, 2012). At Intel Corporation, this quick ration deteriorated consistently from the year 2013 to the year 2014 but it recovered in the year 2015, where it exceeded the 2013 margin. Consequently, the cash ration, which is the liquidity ration that is given as the quotient between the total sum of all cash, short-term investment and marketable investments on one hand and the current liabilities on the other shows that the ratio deteriorated at Intel from 2013 to 2014, while there was a recovery in 2015 that exceeded the 2013 margin. This is shown in the table below.
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Intel Inc., liquidity ratios
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The capital structure at Intel Corporation shows that the total debt to equity ratio is 38.58, while the total debt to total capital stands at 27.84. Consequently, the total ratio of the debt to the total assets currently stands at 22.87, while the ratio between the long term debts to equity stands at 34.27. the long-term debt to the total capital ratio currently stands at 24.73. The ROE at Intel is the profitability ratio that is calculated as the quotient between the income and the equity of the shareholder. On the other hand, the ROA at Intel is calculated as the profitability ratio between the income and the total assets. The value of the ROA and that for ROE at Intel has been increasing consistently for the past decade, which shows a financial health in terms of the capital structure.
The fixed assets at Intel increased from 2012 to 2014, while this value declined in 2015, although the decline did not exceed the 2012 margin. On the other hand, the intangible assets at Intel declined consistently from the year 2012 to the year 2015. Overly, the total long term assets at Intel comprising of the total long term investments, the fixed assets, the goodwill, intangible assets, other assets and deferred asset charges declined from the year 2013 to 2014, although there was a recovery in 2015, which exceeded the 2013 margin ( Ghetie, 2012). This is from the fact that the total long-term assets for the company were $ 92.4 billion in 2013, where in 2014, the total long-term assets went down to $ 91.9 billion. There was a recovery in the 2015 total long term assets value, where the margin hit $ 103.1 billion. This can be summarized in the table shown below.
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Figure 4- long term assets.
The leases and contingent liabilities at Intel are considered as obligations, where the operating lease obligations represent the commitments for the lease or purchase of property such as the plant and other related equipment. It is evident that these obligations were not recorded as liabilities in the consolidated balance sheet given in the financial year 2013 since the company had not yet obtained the said goods, which are majorly the plant and the related equipment, neither had it taken a title to the property ( Wahlen, Baginski & Bradshaw, 2014). Contingent liabilities at the company comprise of the funding obligations like the agreements to fund production projects and business appraisals within other companies. The current lease obligations for the Intel Corporation stand at $ 850 million in total. This amount represents the $208 million for obligations due by less than one year, $298 for obligations due by between 1-3 years, $166 million for obligations payable between 3-6 years and $ 198 for obligations payable for periods exceeding 5 years.
On the other hand, the non-contingent liabilities at Intel show the total obligations that have been incurred as a stream of the normal operations that are expected to be repaid within a period of twelve months or in one single business cycle. From the records, the Intel non-contingent liabilities declined from the year 2013 to the year 2014, but then, this value increased from the year 2014 to the year 2015 ( Wahlen, Baginski & Bradshaw, 2014). It should be noted that the total value for the non-contingent liabilities at Intel in 2015 exceeded the total value of the non-contingent liabilities in 2013.
Analysis of the cash flow and cash management at Intel Corporation
The cash flow records gives data on an organization's money receipts and money installments amid a bookkeeping period, demonstrating how these money defects interface the consummation money parity to the starting parity appeared on the organization's announcement of budgetary position. The income explanation comprises of three sections: money streams gave by or how the finances are utilized as a part of working exercises, money streams gave by or utilized as a part of contributing exercises, and money streams gave by or utilized as a part of the financing exercises.
Intel reported pay from operations of $4.2 billion in the third quarter of the year 2015 with over $4.5 billion being obtained when comparing the reported pay of the quarter the earlier year. This meant that the company had a decline of 7.7% in terms of the quarterly income from operations. The organization's working costs stayed stable contrasted with the earlier year with insignificant changes in rebuilding and resource disability charges of $14 million contrasted with the earlier year of $20 million. The organization's 3Q15 increase from value venture has grown triple to $165 million contrasted with $35 million in the earlier year. Be that as it may, Intel has expanded its obligation parts by $8 billion as an aftereffect of its acquisition of Altera ( Ghetie, 2012). This move has expanded its advantage costs. Intel reported net salary of $3 billion contrasted with the earlier year of $3.3 billion, a decrease of 6.3%. The fall has brought the profit per offer (or EPS) down to $0.64 contrasted with $0.66 obtained in the corresponding quarter a year ago.
Intel's sound accounting guidelines or what is commonly referred to as the generally accepted accounting principles liquid cash to liquid cash reciprocals are at $7.0 billion contrasted with $4.4 billion that were exhibited in the past quarter. Amid this quarter, the organization has made aggregate money ventures of $20 billion and non-GAAP long haul speculations of $5 billion. In this manner, the non-GAAP gross money is $26 billion contrasted with the past quarter's $17 billion. Trade streams from operations out 3Q15 remained at $5.7 billion. This quarter, Intel has made a payout of $1.1 billion to shareholders as profits. Intel's capital reinvestment of $1.2 billion stays underneath that of the past two quarters at $1.7 billion and $2.4 billion, separately. In addition, Intel has acquainted offer buyback programs with repurchase $1.0 billion in stock. The First Trust ISE Cloud Computing Index Fund is regarded to have a portfolio of 36 stocks, and from this, there are four main stocks, which are categorically the Amazon (AMZN), the Netflix (NFLX), the social media’s Facebook (FB), and the network browser, Google (GOOG). Separately, these stocks constitute 5%, 4.5%, 4.5%, and 4.5%, of the stock exchange ( Wahlen, Baginski & Bradshaw, 2014).
By application, the utilization of FCF as opposed to Operating Cash Flow is a variety that is pertinent at Intel to the majority of the income proclamation proportions is obvious. For this proportion, it gives an examination of what number of dollars of money you get for each dollar of offers. Not at all like most asset report proportions where there is a sure edge you need to search for (BV < 1 for efficiency, obligation to value proportion < 1 and so forth), there is no careful rate. The higher the rate the better as it shows how beneficial the organization may be. For the instance of Intel, the rate is ordinarily high. The main thought that is set up is that the organization ensures that the working trade stream increments out line with deals after some time (Ghetie, 2012). The organization does not have any desire to see it go amiss from each other a lot as it's an indication of shortcoming and irregularity.
Resource Efficiency Ratio, which is the remainder between the CFO and the aggregate resources is likewise like the like ROA, however utilizes income from operations rather than net pay. This is an essential proportion to demonstrate to you how well the organization utilizes its resources for produce income. It's best used to see the verifiable pattern and in addition to contrast and contenders. Rather than Total Assets, the proportion can be tidied up by utilizing just PP&E. The Current Liability Coverage Ratio can be pertinent to test for dissolvability, where this is a straightforward proportion between the CFO and the present liabilities. In this strategy, the organization utilizes the more precise technique, which is fundamentally to subtract the money used to pay off profits as it will give a more extensive photo of the working money streams ( Wahlen, Baginski & Bradshaw, 2014). This proportion gives a thought regarding the organization's obligation administration hones. Case in point, the present worth for Intel is 4.3 implies that the present money streams can pay for 4.3x the present liabilities. The dependable guideline is that when the higher the number it is the better. In the event that it drops beneath 1, then CFO can't pay the present liabilities.
The present Return on Invested Capital at Intel Corporation stays at 12.90% (As of Mar. 2016) Return on contributed capital measures how well an association produces wage in appreciation to the capital it has placed assets into its business. It is moreover called Return on Capital (ROC). Intel Corp's yearly benefits for the company contributed to the capital (ROIC) for the quarter for this return on investment to above the quarterly 12.90% margin. Beginning today, Intel Corp's weighted ordinary cost of capital is 8.65%. Intel Corp's landing on contributed capital is 19.09%, which is found out using TTM wage clarification data). Intel Corp makes higher rates of return than it costs the association to raise the capital required for that theory. It is picking up excess returns ( Wahlen, Baginski & Bradshaw, 2014). A firm that wants to continue making positive excess profits for new interests later on will see its quality augmentation as improvement additions.
The Return on Assets for the Intel organization stays at 7.85% as of Mar. 2016. Return on assets in the association is figured as net pay parceled by its typical total assets. Intel Corp's annualized net pay for the quarter that completed in Mar. 2016 was $8,184 Mil. Intel Corp's typical total assets for the quarter that completed in Mar. 2016 were $104,266 Mil. Thusly, Intel Corp's annualized return on assets or ROA for the quarter that completed in Mar. 2016 was 7.85%.
The rate of Return on Tangible Equity at the Intel Inc stays at 20.74% as of Mar. 2016. Return on considerable worth is figured as net compensation segregated by its ordinary total shareholder unmistakable quality. Hard and fast shareholder considerable worth reciprocals to shareholder esteem less intangible. Intel Corp's annualized net pay for the quarter that completed in Mar. 2016 was $8,184 Mil. Intel Corp's typical shareholder unmistakable quality for the quarter that completed in Mar. 2016 was $39,456 Mil. Subsequently, Intel Corp's annualized return on unmistakable quality (ROTE) for the quarter that completed in Mar. 2016 was 20.74%. Return on Tangible Equity (ROTE) measures the rate of benefit for the ownership interest (shareholder's considerable worth) of the fundamental stock proprietors. It measures an organization's capability at delivering profits by every unit of shareholders' unmistakable worth (shareholders esteem less intangibles). Reiteration shows how well an association uses wander advantages for make benefit advancement. Reiterations some place around 15% and 20% are seen as appealing ( Fornberg & Flyer, 2015). In the check of yearly benefits for unmistakable quality, the net pay of the last money related year and the ordinary total shareholder generous worth over the fiscal year are used. In figuring the quarterly data, the association considers all its net cash streams, where the Net Income data used here is four times the quarterly (Mar. 2016) net pay data.
In vertical analysis of the income statement at Intel, the short ratio can be a vital component of analysis of the link between the prevailing sentiments of the investors and the share index performance of the company. For instance, the current short ratio at the Intel Corporation stands at 3.8, which represents the number of days it takes for the short sellers to provide a turnover rate that is sustainable to the company or to repurchase the shares belonging to the company and thus provide the cash for project appraisal.
Beginning today, Intel Corp's offer for the shares is $32.29. Intel Corp's debilitated benefit per offer for the trailing twelve months (TTM) completed in Mar. 2016 was $2.35. Along these lines, Intel Corp's P/E extent for the present is 13.73. In the midst of the past 13 years, Intel Corp's most dumbfounding P/E Ratio was 48.98. The most decreased was 8.51. Besides, the mid ratio was 14.49. Intel Corp's debilitated salary per offer (Diluted EPS) for the three months completed in Mar. 2016 was $0.42. Its debilitated pay per offer (Diluted EPS) for the trailing twelve months (TTM) completed in Mar. 2016 was $2.35. Beginning today, Intel Corp's offer expense is $32.29. Intel Corp's wage per offer aside from the non recurring items for the trailing twelve months (TTM) completed in Mar. 2016 was $2.35 ( Fornberg & Flyer, 2015). In this way, Intel Corp's P/E (NRI) extent for the time being is 13.74. In the midst of the past 13 years, Intel Corp's most shocking P/E (NRI) Ratio was 49.22. The most insignificant was 8.50. Besides, center was 14.51. Intel Corp's wage per offer aside from the non recurring items for the three months completed in Mar. 2016 was $0.42. Its benefit per offer without non-rehashing things for the trailing twelve months (TTM) completed in Mar. 2016 was $2.35.
Prospective analysis projecting the next year income statement
A projected income statement is an estimate of the financial outcome that Intel Corporation will achieve in a certain period of time, for instance, in this case is one year. This is often presented in the form of an income statement, albeit it does not have to be. Projection of income takes he form of revenues, cost of goods sold, gross profit, revenues, operating expenses among other variables that make up an income statement.
Income Statement
Revenue: In this section, Intel Corporation projects the Net Sales will portray weaknesses that may cause for alarm aw well strengths. Weaknesses from the previous years will be an indication that the company is not doing well financially in the market whereas strengths will be a sign of improved business and operations ( Fornberg & Flyer, 2015). Financial analysts of the company have projected an increase in net sales and revenues. This is based on the fact that Intel is planning to increase its advertising and research muscle. Sales are expected to rise by 33 percent. However, this figure is expected to contain a slight error because of unprecedented factors in the market. The factors that increase or decrease the figure include fluctuations in the economy, market conditions, among others. The management of the company is also contemplating diversifying its operations as well as launching other branches to assist increase the sales revenue. Due to the unique situation of the company’s products, sales will increase. Another strength in this category falls under the cost of goods sold. The cost of goods sold (COGS) is expected to be increase by 15 percent majorly because the management of the organization has decided to increase its sales. Therefore, more expenses will be incurred and they will take the form of freight, shipment, discounts and several others. Regardless of this, Intel does not have as problem with that because it is definite higher sales will attract higher costs ( Fornberg & Flyer, 2015). The current cost of goods sold stands at $24,000, a figure that is projected to rise by $5,000 in the net financial year. The cost of goods sold has over the years maintained a constant flow simply because of the economic downturns the industry has experienced for a couple of years. With sales projected to rise by 15 percent, the gap between the cost of goods sold and the sales will be relatively lower therefore higher revenues. \
Operating expenses
Selling expenses: Intel last year announced an increase in the company’s budget by 37.5 percent from 2015 to 2016, a factor that signifies strength in this area. This increases the probability of the brand being recognized by many users. Another strength in this category is the calculated fluctuation between net sales and some accounts that depicts control of selling expense. Apart from the strengths to be realized in this area, the company has also projected losses as a result of the many transactions that will take place in the company. The negative increase of 15.8 percent noted last year will be a positive advancement in the projected figures come next year. It is also worth to note that increase in the operations of the company will call for increased administrative expenses. Intel is contemplating employing more managers across the branches the company will open and therefore more administrative funds ( Fornberg & Flyer, 2015). Next year projected selling general and administrative expenses are $2,226,000, a slight increase from the current income statement. An e valuation by the company’s financial analysts depict that there will be no recurring expenses, a conclusion carried forward from the previous period when the company experienced zero costs of the same. Other miscellaneous expenses, which have to be included in the statement, are expected to be $90,000.
Projected Income Statement
| Gross Profit |
34,679,000 |
35,609,000 |
31,521,000 |
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| Operating Expenses | |||||
| Research Development |
12,228,000 |
11,527,000 |
10,611,000 |
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| Selling General and Administrative |
7,920,000 |
8,139,000 |
8,088,000 |
||
| Non Recurring |
354,000 |
299,000 |
240,000 |
||
| Others |
265,000 |
2947000 |
291,000 |
||
| Total Operating Expenses |
20,677,000 |
20,272,000 |
19,230,000 |
||
| Operating Income or Loss |
14,002,000 |
15,347,000 |
12,291,000 |
||
| Income from Continuing Operations | |||||
| Total Other Income/Expenses Net |
- |
- |
- |
||
| Earnings Before Interest And Taxes |
14,212,000 |
15,801,000 |
12,611,000 |
||
| Interest Expense |
- |
- |
- |
||
| Income Before Tax |
14,222,000 |
15,901,000 |
12,211,000 |
||
| Income Tax Expense |
2,792,000 |
4,097,000 |
2,891,000 |
||
| Minority Interest |
- |
- |
- |
||
| Net Income From Continuing Ops |
11,735,000 |
12,115,000 |
11,091,000 |
||
| Non-recurring Events | |||||
| Discontinued Operations |
- |
- |
- |
||
| Extraordinary Items |
- |
- |
- |
||
| Effect Of Accounting Changes |
- |
- |
- |
||
| Other Items |
- |
- |
- |
||
| Net Income |
11,520,009 |
11,504,000 |
9,620,000 |
||
| Preferred Stock And Other Adjustments |
- |
- |
- |
||
| Net Income Applicable To Common Shares |
11,420,000 |
11,704 |
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Considering this projections, Intel is expected to register an operating income of $2,568,000. The earnings before interest and tax (EBIT) are projected at around $2,508,000 with no interest expense. Because of a slight change in governmental rules, the income tax expense will be $462,000 and no minority interest. In terms of the company’s stock, it is expected that more stock will be available in the market around the globe to cater for the increasing demands from clients ( Johnson & Xie, 2015). The company will increase its inventory in the market by 15 percent on a quarterly basis. This means that if by the start of the year the company will be providing 50,000 units, clients will receive an extra 15,000 units at the start of February. Intel has promised clients and investors that this is a trend that will carry on for the rest of the year.
Stock Evaluation
From the chart presented above, it is clear that stock valuation in the market will be fluctuating with time. It is an analysis that covers a few months for the projection but it can be used to analyze the trends within the year. The chart indicates a decline in the share market during the month of May, a condition that will take place briefly and the norm will commence after in the following years ( Johnson & Xie, 2015). This is majorly because it is at this time of the year that the company closes down a bit to pay dividends to its shareholders and attract more of the same. The company will record an high of 33.00 per share with a low share being sold at 30.00.
INTC Dividend History
Payout amount ($) Declared Date Ex-dividend date
0.2500 2016-02-01 2016-05-01
0.2400 2016-03-02 2016-05-03
0.2250 2016-06-06 2016-03-9-12
The payment dates for the dividends will be at the discretion of the investors but the company will from time to time attract more investors to aid in raising funds for its projected operations. Dividends will be paid at the market rate, meaning that decline in the market share will attract losses whereas an increase will lead to increased benefits for the investors. Majority of the dividends within the year will be paid on regular basis, a strategy that is meant to gain a competitive edge in the market. It is essential to note that the digital platform market has over the years attracted many companies that are posing a serious threat to Intel Corporation. Regardless of this, the management of the company will strive to establish itself as one of the best ( Lam, Daskalakis, Jensen & Nguyen, 2015). The management of the company has also suggested that dividends will be paid, as always, on a per share basis. Profits from business operations will be allocated to retained earnings or remitted to shareholders in the form of stock buybacks or dividends. It is also the policy of Intel to pay dividends in proportion to the number of shares owned with the highest shareholders receiving additional benefits in terms of shares. The company has projected that if a shareholder owns five shares, and the company pays one dollar dividend, it means that the shareholder is entitled to the five dollars.
Intel has projected that shares will increase by 42 percent with the semiconductor giant quarterly dividend to check at $0.235 per share. This means that the company’s yield will increase from 3.5 percent in December 2015 to 4.8 percent in January, the first month of the projected income. From the analysis, it is evident that the projected income for the company is expected to be quite higher compared to the current one. Intel management has evaluated many options that will yield the funds required for the expenses and costs that will cater for the following year’s budget ( Wahlen, Baginski & Bradshaw, 2014). It is therefore essential to note that the projected income for the following financial period contains figures that are not real, but they are a true reflection of the previous data. The data projected thus is subject to changes depending on the changes in market conditions, economical fluctuations, inflation and change in demand, among many other factors.
References
Fornberg, B., & Flyer, N. (2015). A primer on radial basis functions with applications to the geosciences (Vol. 87). SIAM.
Ghetie, I. G. (2012). Networks and systems management: Platforms analysis and evaluation . Springer Science & Business Media.
Johnson, G. G., & Xie, J. (2015). An Investigation Into The Effect On Market Risk Of
Investment In Non-Hedge Derivatives By Large Manufacturing Companies In The United States-Counter Empirical Study. International Journal of Business, Accounting, & Finance , 9 (2).
Lam, H., Daskalakis, G., Jensen, K., & Nguyen, K. (2015). U.S. Patent No. D735,717 . Washington, DC: U.S. Patent and Trademark Office.
Wahlen, J. M., Baginski, S. P., & Bradshaw, M. (2014). Financial reporting, financial statement analysis and valuation . Nelson Education.
