Question

Question 1: Statement of Cash Flows

The statement of cash flow reports cash flow amounts including 1) operating cash flow, 2)

investing cash flows, and 3) financing cash flows.

REQUIRED: Describe the corporate strategy of a company that has a positive operating cash flow,

an investing cash flow that is negative, and a financing cash flow that is positive.

Question 2: Common-Size Balance Sheets

Analyzing common-size balance sheet for assets. Please open the attachment “Common-Size

Assets”. Three companies are shown for assets only. They are in percentage terms only. Total

assets equal 100%. This allows us to compare the assets held by the companies regardless of size.

This data was taken from the Morningstar website. We will be using this website for future

assignments. There is no fee involved to get the data we need. There will be more about this in

the weeks to come. The three companies are Texas Instruments (TXN), Intel Corp (INTC), and

Qualcomm Inc (QCOM). They are all in the same sector (Information Technology) and industry

(Semiconductors).

REQUIRED: Compare these three companies and make note of significant differences between

them. Pick out several items that stand out. Do not comment on every line. You should identify

at least five items. You do not have to do any research beyond the numbers. You do not have to

consult the Morningstar website for this assignment. This is designed to get you accustomed to the data that is available for analysis

Answer 1

Answer

1)

A company which has a positive operating cash flows, a negative investing cash flows and a positive financing cash flows is considered to be in a development stage. Postive operating cash flows means that the company has cash after paying for all its operating expenses. A positive financing cash flows means the company is raising funds from either equity or debt in order to make capital expenditures.

This cash would not be used for operating activities as the cash flows operations is enough to pay for it.

A negative investing cash flows means the company is investing in plant, property an equipemnt for futher growth and development.

2.

The comparative balance sheet of the three companies showing the percentage of assets items to the total assets shows how the total assets are comprised of for each company. The major areas of comparison are:

a) Qualcomm has a very high cash balance which is more than 50% of the total assets, whereas Intel Corp has low cash balance as a percentage of total assets and Texas cash balance is 24% of total assets. This shows Qualcomm major asset is cash.

b) Intel Corp has only 33% on assets as current assets. This means majority of the companys investment is in long term assets. Whereas Qualcomm has almost 66% of assets as current asstes signifying manority investment in current asset. However Texas has a more balance investment with 45% in current assets.

c) Qualcomm has very low investment in net fixed assets as only 5%, Intel Corp has a high investment in net fixed assets at 32% and Texes has net fixed assets at 15% of total assets.

d) Goodwill is the highest for Texas with goodwill comprising of 26% of total assets, followed by Intel Corp at 12.4% and least of Qualcomm at 5%.

e) Intel Corp has the highest share of Equity and other investments in total assets followed by Texas and Qualcomm which have almost the same percentage share.