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Profitability Measures; Liquidity Measures; Activity Measures; Financial Leverage Measures; Physical Measures

Required:

a. Compute the following profitability measures for the year ended
December 29, 2001:

1. Return on investment, based on net income (perform a DuPont analysis).
2. Return on equity, based on net income.
3. Price/earnings ratio. Use $32.24 as the year-end market price.
4. Dividend yield.
5. Dividend payout ratio.

b. Compute the following liquidity measures at December 29, 2001:

1. Working capital.
2. Current ratio.
3. Acid-test ratio.

c. Compute the following activity measures for the year ended December 29,
2001:

1. Number of days' sales in accounts receivable, based on a 365-day year.
2. Number of days' sales in inventory, based on a 365-day year.
3. Accounts receivable turnover.
4. Inventory turnover.
5. Turnover of net property, plant, and equipment.

d. Compute the following financial leverage measures at December 29, 2001:

1. Debt ratio.
2. Debt/equity ratio.
3. Times interest earned.

e. Compute the following physical measures of Intel's profitability at
December 29, 2001:

1. Net revenues per employee.
2. Operating income per employee.

(Hint: The number of employees at year-end is disclosed on page 12 of the
Intel annual report in the Appendix.)

*See attachments for complete details.

Attachments

Solution Preview

Please refer to the attachment.

Ratio analysis-comprehensive problem, 2001 data. This problem is based on the 2001 annual report of Intel Corporation, in the Appendix.

(The 2001 Intel Annual Report can be found here: http://www.intel.com/intel/annual01/index.htm and the financials can be found here: http://www.intel.com/intel/annual01/01financials.pdf )

Required:

a. Compute the following profitability measures for the year ended
December 29, 2001:

1. Return on investment, based on net income (perform a DuPont analysis).
By DuPont analysis,
ROI = Net income/ Gross book value
= Net Income / (stockholders' equity + long-term debt)
= 1291/ (35830+1050) = 3.5%

2. Return on equity, based on net income.
ROI = Net income/ stockholders' equity = 1291/ 35830 = ...

$2.19