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Pages:
4 pages/≈1100 words
Sources:
6 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
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MS Word
Date:
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Topic:

Vocabulary and Practice of Organizational Finance

Research Paper Instructions:

Assignment Overview Every business, worldwide, whether for profit or not-for-profit, must keep score of its performance and progress. While there are many ways in which a business entity can be evaluated, the most common measures are financial in scope. All businesses must understand how well or how poorly their operations are performing at all times, not only at the end of some pre-determined fiscal time period. Financial statements provide the basic data for analyzing and understanding the company’s performance, over time. These financial statements are concise reports designed to summarize particular financial activities for a specific time period (one month, one quarter, one year, five years, etc.).

There are several different types of financial statements. Some are generally used internally; others have greater usage outside the company, for bankers and investors, for example. The two key reports for companies of all sizes and categories of business are the Income Statement, which records revenue and expense, and the Balance Sheet which lists what the business owns and what it owes.

It is a “snapshot” of the business at a particular point in time. These two basic financial statements can provide a picture of the company’s strengths and weaknesses -- provided that you know how to read them.

By regularly analyzing a company’s financial statements’ information, both management and investors can detect problems early, and take corrective action on problems such as falling sales volume, high operating costs, credit and inventory mismanagement, and funds tied into excessive fixed assets.

By comparing financial statements over several fiscal periods, the company’s management can more easily spot and track trends and makes the necessary budget revisions before small problems become big ones. Also, all these financial data help lenders and other investors make intelligent decisions about their participation in the business. It is equally important to think about how these interpretations translate back into managerial performance.

To get some insights into how executives use the financial information to evaluate their firms and others, take a look at this discussion of the uses of financial information, this discussion on financial ratio analysis and this discussion on how to read a financial report. The application of these indicators is a good place to start learning about how financial information is interpreted. As a case in point, consider AMD Corp., one of the leading producers of microprocessors and 3-D graphics technology. They've had their ups and downs, but have been consistently competitive. And one of the reasons, of course, is that they have attended very carefully to the financials, and to their relationships with their investors. If you go to AMD's Investor Relations website, you can see the variety of information that they provide to the public and the financial markets. Each year, publicly traded companies are required to file what is called a 10K statement, reviewing their financial status. Please read the background of 10k's in the previous link and then look at AMD's 2010 10-K filing. The 10-k is quite long and you do not have to read the entire statement. For this case you should concentrate on reading: - Item 6. Selected Financial Data, page 38. - Item 7. Management’s discussion and analysis of financial condition and results of operations, pages 39-73. Try to look for the kind of information that AMD is providing about its own financial status. The background information also contains further information about how to interpret financial information about companies, and you may find it useful. You may also wish to consult search tools for further information about the status of the company. Case Assignment When you have reviewed the above information, please prepare a short (3-5 page) paper discussing the question: What does AMD’s presentation of their financial information tell you about how they use financial information to inform investors? What does AMD's presentation of their financial information tell you about how they use financial information for internal decision making? In other words, what financial analyses do they use to inform their decisions?

Research Paper Sample Content Preview:

Vocabulary and Practice of Organizational Finance
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Vocabulary and Practice of Organizational Finance
For any given business or company to succeed, it is vital for it to maintain good communication channels with its investors and other stakeholders as well. It remains a clear fact however, that financial information forms the basis for determining performance and or soundness of a business enterprise (Rogers & Kasanoff, 2000). This paper focuses of financial analysis of AMD Corp or rather Advanced Micro Devices, Inc., which is a United States based computer devices and silicon-based Microprocessor Company that has well over 10,000 people in its employ. The company was founded in 1969 in Silicon Valley and is among the top 100 U.S. companies by measure of sales volume. It remains a World-leading company in development and integration of digital technology and the semiconductor market (AMD, 2015).
As mentioned, this analysis will also focus on AMD’s performance for financial periods ranging from the year 2010 to 2013. For this purpose, the paper involves looking at aspects of financial statements analysis. Indeed, financial statements or reports act as a lens of looking into the overall position of a firm; hence, they create a platform for determining investments into a business. For purposes of comprehending the figures indicated herein, it is important to note that they are presented in terms of Millions of Dollars.
To begin with, AMD Corp. has witnessed increases in both its overall revenue earned and cost of goods sold. It is important to note nevertheless, that this financial feature cannot be a reliable basis of determining the company’s credit ratio, at least for the short-term period. In particular, the recorded increase in revenue is from $5,627 in 2006 to 6,494 in 2010. Additionally, the Cost of goods sold has reduced tremendously from $10 in 2008 to $4 in 2010 (AMD, 2015).
In relation to the company investors, and as a function of net income attributable to the company’s common shareholders, a record increase has been recorded from the years 2008, 2009 and 2010 as being $471, $304 and $(3,129) in that order (AMD, 2015). This unquestionably implies that the company maintains desirable returns and communication patterns regarding its financial performance to its stakeholders (Drake, 2012).
It is important to note that profit margin analysis involves aspects of gross, operating and net profit margins (Drake, 2012). AMD, in its presentation of this financial information, keenly articulates how the company operations in association with key partners were conducted. All the same the increase in gross margin realized for the period between 2008, 2009 to 2010 is 40%, 42% to 46% respectively and as a percentage of net revenue. It remains clear that the company’s profit margin analysis offers positive results, which directly reflects a quality of overall positive investments and hence overall growth achievement. All the same, the company involves a lot of diligence in forecasting future trends in its reports. It also depicts that AMD has not only achieved effective and efficient utilization of its resources for production including manufacturing asse...
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