Assessment of Financial Statements

Published: 2019-04-15 12:50:38
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Advance Micro Devices Inc

In Advance Micro Devices Inc (AMD), the gross profit margin for three years 27.94% with the average gross margin growth for the same period being -4.66%. Also, the revenue growth for four fiscal years is -4.71%. Focusing on the key financial ratios for the company, the return on assets (ROA) was -29.58% in 2012, -1.91% in 2013 and -14.97%. The average 3-year average has been -15.63% while the five-year average of -15.68%. Since the return on assets is a measure of management’s efficiency in utilizing the assets to generate income, the company has not been efficient in using the material goods because of negative growth in both Three- and five-year average.

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About the return on equity the three- and five-year average has been -58.26% and -81.99% respectively, and given that it is a measure of the income derived from shareholders equity, the company has not been effective in using this parameter for a 5-year period. However, regardless of AMD showing positive growth in its cash flow for the past five years, there are some financial risks regarding the sources because the debt to assets ratio is very high at over 80% meaning that it can be dissolved without difficulty. Even if there was a negative value in the profit margin at -11.63% in 2016, the organization showed a positive progress in deriving benefits from its sales in comparison to the previous years.

Focusing on Intel Corp financial performance over the last five years, the company had positive growth since its revenue growth for that fiscal period was 2.79% with its gross profit margin at 62.447%. About the gross profit margin, it has an implication that the organization has been using its sales in an appropriate way to generate its proceeds. Considering the net income growth, the five-year average was 9.67% with the return on assets being 10.97% while the return on equity at 11.27%. When compared to AMD, the Intel Corp has outperformed its competitor in the market because a positive return on assets at 10.97% it utilizes one dollar of its assets to generate 0.1097. Also, this has been the same case for the ROE. The Intel Corp has been earning more on the shareholder investment in comparison to the AMD which had an average of -81.99% in the same period. Considering the risk of solvency, the Intel is in a better position because its debt to asset ratio is less than 50%. Therefore, in AMD the decisions made by the management have not been in line with the organization’s objectives and needs in the technology industry.

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