Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 60

Ratio analysis—comprehensive problem, 2008 data This problem is based on the 2008 annual report of Intel Corporation in the appendix.

Required:

a.Compute the following profitability measures for the year ended December 27, 2008:

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 $14.18 as the year-end market price.

4. Dividend yield.

5. Dividend payout ratio.

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b. Compute the following liquidity measures at December 27, 2008:

1. Working capital.

2. Current ratio.

3. Acid-test ratio.

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c. Compute the following activity measures for the year ended December 27, 2008:

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.

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d. Compute the following financial leverage measures at December 27, 2008:

1. Debt ratio.

2. Debt/equity ratio.

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e. Compute the following physical measures of Intel’s profitability at December 27, 2008:

1. Net revenues per employee.

2. Operating income per employee. (Hint: The number ofemployees at year-end is disclosed on page 685 of the Intel annual report in the appendix.)

Step 1 of 20

Ratio analysis – Comprehensive problem

Ratio analysis : Ratio analysis is used for fundamental analysis of a business.

Note: The data are substituted from the appendix as the annual report of Intel Corporation.