Is&cfs Team Work2

GROUP:JGS NAME:XIAONING JIA , YING GU , SONG SONG IN-CLASS EXERCISE: Analyzing Income Statement and CFS Read over the financial tables given below. After analyzing the tables, decide which company you would prefer to invest in. Be prepared to give your reason.

Intel Corporation is a semiconductor chip maker. The Company is engaged in developing advanced integrated digital technology products, primarily integrated circuits, for industries, such as computing and communications. Its primary component products include microprocessors, chipsets, wired and wireless connectivity. (hoovers.com) Intel Corp. INCOME STATEMENT 2008 2007 2006 Revenue ($mil.) 37,586.0 38,334.0 35,382.0 Gross Profit ($mil.) 20,844.0 19,904.0 18,218.0 Operating Income ($mil.) 7,694.0 9,181.0 7,092.0 Total Net Income ($mil.) 5,292.0 6,976.0 5,044.0 EPS 0.92 1.18 0.86 STRENGTHS: Cost of sale’s reduction. By analyzing INTEL’s income statement in 2008 and 2006,respectively, we can see INTEL managed to increase revenue by about 6.23%. After computing, we got the change of cost of sales which reduced about 2.46% between 2008 and 2006(the cost of sales reduces from 48.5% to 44.5% of sales). As a result, the gross profit increased by about 14.4% between 2008 and 2006. And the net income increased 4.92%. We think this is the main reason for income growth, and also a huge plus for the company’s profitability. So we regard it as the strength of INTEL. WEAKNESSES: Growing of operating expenses. Using the data of gross profit and operating income,we can get the operating expenses. The operating expense represented about 31.4% of sales in 2006, but in 2008 it increased by about 35.0%, which is not favorable in sales increase. So the company’s profit margins from decreased from14.3% to 14.1%.

Intel Corp. CASH FLOW STATEMENT Dec08 Dec07 Dec06 Net Operating Cash Flow 10,926.0 12,625.0 10,620.0 Net Investing Cash Flow (5,865.0) (9,926.0) (4,907.0) Net Financing Cash Flow (9,018.0) (1,990.0) (6,439.0) STRENGTHS: From analyzing INTEL ‘s CFS，we can see that the core operations are generating business. Also ,it has a modest increase about 2.81%. Although the net investing cash flow decreased about 19.5%, but we think it as a investing. So this may increase the cash flow in the future. WEAKNESSES: From analizing CFS in Dec06 to Dec08,we can see the cash flow from finacing decreased about 40.05%. So we think this company has a problem here. INTEL may has a large of notes payable to pay for.This caused a big finacing problem in short-time.They will not have enough much money to produce,investing and so on.Consequently the total cash flow in 2008 was negative 3957 which was only nagetive 726 in 2006.

Advanced Micro Devices, Inc. is a global semiconductor company with facilities around the world. The Company offer x86 microprocessors, for the commercial and consumer markets, embedded microprocessors for commercial, commercial client and consumer markets and chipsets for desktop and notebook personal computers (PCs), professional workstations and servers. (hoovers.com) AMD INCOME STATEMENT Revenue ($mil.) Gross Profit ($mil.) Operating Income ($mil.) Total Net Income ($mil.) EPS

2008 5,808.0 2,320.0 (1,980.0) (3,098.0) (5.10)

2007 6,013.0 2,262.0 (2,799.0) (3,379.0) (6.06)

2006 5,649.0 2,793.0 (17.0) (166.0) (0.34)

STRENGTHS: I don’t think AMD corporation has any strengths. The only increaseing between 2008 and 2006 is the revenue with only a modest change about 2.81%. May be they have cheaper stuff, a little faster transporting, but these are not the key factors. WEAKNESSES: A huge increase of cost of sales.The revenue between 2006 and 2008 increased a modest data about 2.81% ,but the increase of cost of sales increased from 50.6% to 60.0% of sale. As a result the gross profit has decreased about 16.9% . A big increase of operating expense. The operating expense increased from 49.7% in 2006 to 74.0% in 2008 of sales. The increaseing led to the operating income in 2008 decreased about 115.5 times of it in 2006. A large interse of interesr expense. In 2006, the interest expense represented 2.63% of sales , but in 2008, it increased to 19.2% of sales. Consequently, the net income decreased significantly about 17.66 times between 2006 and 2008.We think AMD has a big financial problem.

AMD CASH FLOW STATEMENT

Dec08

Dec07

Dec06

Net Operating Cash Flow

(692.0)

(310.0)

1,287.0

Net Investing Cash Flow

(27.0)

(1,675.0)

(4,303.0)

Net Financing Cash Flow

220.0

2,037.0

3,763.0

STRENGTHS: The net investing cash flow has increased 99.4% from Dec06 to Dec08. Although we don’t think this is the ture strengths for ADM, it eased the totel cash flow in Dec08 at least. WEAKNESSES: AMD company’s core operations has generated much cash outflows. So we think the company may have a big problem in inventory. Maybe the conpany has no much cash flow, so they sold their equipments which brought into a decline in production efficiency. The net financing cash flow decreased 99.4% and CFS decreased 1.67 times between Dec06 and Dec 08. As a result the total cash flow was badly nagetive $3098mil. So in short period , there will be a big problem for ADM.

If we were investors, we will invest in INTEL corporation.The EPS of INTEL increasd 6.98% between 2006 and 2008. And the net income also increased about 4.92%. Alough CFS is not so good in Dec08,their investing and the company’s core operations good enough to attract us to invest in.