Performance Management and Valuation Report

Description

The risk analysis work you did in the first assignment was a great start. It helped to paint a picture of where AMD and Intel are in their corporate lifecycles, the threats and opportunities each faces, and the defensibility of their economic moats – a metaphor that Buffett loves to use. In this assignment, you will continue your analysis by comparing key performance management metrics of our two companies, identifying areas of relative strength and weakness, and suggesting ways that eachcompany could improve, thereby increasing its   valuation. To do this, you will examine trends in order to identify variances and comparisons to: 

(1) establish benchmarks, (2) identify best practices, and (3) lookfor signs of superior performance. This analysis is critical in determining the value of each company, as well as evaluating whether potential acquisition or merger opportunities exist which could create greater value and synergies than those of operating the companies as separate entities.   InstructionsTo prepare, reread the Morningstar Analyst’s Report and the most recent annual reports for both companies with a particular focus on the Income Statementand Statement of Cash Flows.  A.   Complete the Assignment 2 Worksheet to compare key performance metrics and ratios for both companies in order to see how performance can be impacted by manipulating certain financial levers. The guidance for this is found on pages 78-100 of The CFO Guidebook.B.   Summarize your Analysis and Recommendations by answering the following questions:i.   Performance Metrics:a.  Which company is a more efficient generator of income? b.  Which company is growing faster?   c.  Using financial health ratios, which company is more profitable?d.  Which company has stronger valuation ratios? e.  Overall, which is the better run company and why?ii.   Merger Synergies:a.  If there was an acquisition, which company is the most likely acquirer? Why?b.  Would you recommend a merger or acquisition to increase the moat strength of the combined companies? Why or why not?  •If you support a merger or acquisition, identify 3 performance metrics that could be improved by a merger and explain how they would be improved. Guidance for this is found on pages 101-110 of The CFO Guidebook.

JWI 531: Financial Management II Assignment 2 Assignment 2: Performance Management and Valuation Due Week 6, Sunday (18% of final grade) The risk analysis work you did in the first assignment was a great start. It helped to paint a picture of where AMD and Intel are in their corporate lifecycles, the threats and opportunities each faces, and the defensibility of their economic moats – a metaphor that Buffett loves to use. In this assignment, you will continue your analysis by comparing key performance management metrics of our two companies, identifying areas of relative strength and weakness, and suggesting ways that each company could improve, thereby increasing its valuation. To do this, you will examine trends in order to identify variances and comparisons to: (1) establish benchmarks, (2) identify best practices, and (3) look for signs of superior performance. This analysis is critical in determining the value of each company, as well as evaluating whether potential acquisition or merger opportunities exist which could create greater value and synergies than those of operating the companies as separate entities.

Instructions To prepare, reread the Morningstar Analyst’s Report and the most recent annual reports for both companies with a particular focus on the Income Statement and Statement of Cash Flows. A. Complete the Assignment 2 Worksheet to compare key performance metrics and ratios for both companies in order to see how performance can be impacted by manipulating certain financial levers. The guidance for this is found on pages 78-100 of The CFO Guidebook. B. Summarize your Analysis and Recommendations by answering the following questions: i. Performance Metrics: a. Which company is a more efficient generator of income? b. Which company is growing faster? c. Using financial health ratios, which company is more profitable? d. Which company has stronger valuation ratios? e. Overall, which is the better run company and why? ii. Merger Synergies: a. If there was an acquisition, which company is the most likely acquirer? Why? b. Would you recommend a merger or acquisition to increase the moat strength of the combined companies? Why or why not? • If you support a merger or acquisition, identify 3 performance metrics that could be improved by a merger and explain how they would be improved.

Guidance for this is found on pages 101-110 of The CFO Guidebook. © Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This document is subject to change based on the needs of the class. 531 – Assignment 2 (1206) Page 1 of 3 JWI 531: Financial Management II Assignment 2 • If you do not support a merger or acquisition, explain your rationale and why the value of each company is best preserved/increased by remaining separate. The guidance for this is found on pages 111-117 of The CFO Guidebook. Submission Requirements A. Complete and submit the Assignment 2 Worksheet component of the Workbook, along with your written work for Part B, through the assignment link in Blackboard. B. Format your written responses for Analysis and Recommendation as follows: • Typed, double-spaced, professional font (size 10-12), including headings and subheadings (to identify main topics and subtopics), with one-inch margins on all sides.

• References must be included and provide appropriate information that enables the reader to locate the original source. o Application and analysis of course materials and resources is expected. o At least one additional source beyond the course materials must be cited to support your analysis and recommendations. • Include a cover page containing the title of the assignment, your name, the professor’s name, the course title, and the date. • The maximum length is 4 pages, excluding your cover page, completed worksheets, and reference list. © Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This document is subject to change based on the needs of the class. 531 – Assignment 2 (1206) Page 2 of 3 JWI 531: Financial Management II Assignment 2 RUBRIC Weight: 18% of Course Grade CRITERIA 1.

Complete the assignment worksheet Weight: 30% 2. Present synopsis of data Weight: 30% 3. Present and defend sound recommended finance strategies Weight: 30% 4. Include appropriate citations and use professional writing standards Weight: 10% Assignment 2: Performance Management and Valuation Unsatisfactory Low Pass Pass High Pass Honors Did not submit worksheet or had fewer than 60% correct data sets entered. Submitted worksheet had between 60% and 69% correct data sets. Submitted worksheet had between 70% and 79% correct data sets. Submitted worksheet had between 80% and 89% correct data sets. Submitted worksheet had 90% or higher correct data sets.

Synopsis was missing, incomplete, inaccurate, or did not align with data. Synopsis was overly simplistic; restated the data, but did not provide a coherent overview. Synopsis was good; provided general snapshot of key data, but did not focus on the most critical elements. Synopsis was very good; focused on the most critical elements with only minor elements unclear/missing. Data synopsis was excellent; accurately highlighted key data presented in both annual reports and thirdparty sources. Recommended strategies were missing, superficial, and/or were not supported by data and analysis. No options were presented. Recommended strategies were basic or were not supported by data and analysis or tied to desired outcomes. Made minimal reference to options, but did not explain why these were not recommended. Recommended strategies were good, but lacked clarity on how they could be implemented to drive outcomes.

Addressed other options, but was unclear why these were not chosen. Presented and defended very good finance strategies; solid connection to core finance principles and to real-world circumstances. Very good consideration of viable options with good rationale for why options were not chosen. Presented and defended excellent finance strategies; exemplary connection to core finance principles and to real-world circumstances. Excellent consideration of viable options with very clear rationale for why options were not chosen. No citations provided and/or references to course materials were missing or did not support key content in submission; numerous writing mistakes. Included some citations and references to course materials, but failed to cite for several key references; contained distracting grammatical or formatting errors.

Citations and references to both course materials and additional sources were properly documented; contained some grammatical and formatting errors. Citations and references to both course materials and additional sources were properly documented; contained minor grammatical and formatting errors. Citations and references to both course materials and additional sources were properly documented; free from grammatical and formatting errors; adhered to maximum length. © Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This document is subject to change based on the needs of the class. 531 – Assignment 2 (1206) Page 3 of 3 JWI 531 Finance II Assignment 2 Template HOW TO USE THIS TEMPLATE: This is a template and checklist corresponding to your Assignment 2 paper: Performance Management and Valuation. See below for an explanation of the color-coding in this template: • All green text includes instructions to support your writing.

You should delete all green text before submitting your final paper. • All blue text indicates areas where you need to replace text with your own information. Replace the blue text with your own words in black. • Headings and subheadings are written in black, bold type. Keep these in your paper. TIPS: • Write in the third person, using “he” or “she” or “they”, or using specific names. Do not use the second person “you”. • The body of this paper has one-inch margins and uses a professional font (size 10-12); we recommend Arial or Times New Roman fonts. • The Assignment template is already formatted with all needed specifications like margins, appropriate font, and double spacing. • Before submitting your paper, use Grammarly to check for punctuation and usage errors and make the required corrections. Then read aloud to edit for tone and flow. • You should also run your paper through SafeAssign to ensure that it meets the required standards for originality. FINALIZING YOUR PAPER Your submission should be a maximum of 4 pages in length.

The page count does not include the Cover Page at the beginning and the References page at the end. The final paper that you submit for grading should be in black text only with all remaining green text and blue text removed. 1 Assignment 2: Performance Management and Valuation Author’s Name Jack Welch Management Institute Professor’s Name JWI 531 Date 2 Introduction An Introduction should be succinct and to the point. Start your Introduction with a general and brief observation about the paper’s topic. Write a thesis statement, which is the “road map” for your paper – it helps your reader to navigate your work. In your thesis statement, be specific about the major areas you plan to address in your paper. The headings below should guide your introduction, since they identify the topics to be addressed in your paper.

The introduction is not a graded part of your rubric but it helps your reader to understand what your assignment will be about. We recommend that you write this part of your Introduction after you complete the other sections of your paper. It only needs to be one paragraph in length. Analysis and Recommendations This assignment is centered on two broad topics: Performance Metrics and Merger Synergies. Use the headings and sub-headings below to organize your paper. This helps to ensure that you do not miss questions and also helps your reader to easily locate your responses. I. Performance Metrics a. Which company is a more efficient generator of income? b. Which company is growing faster? c. Using financial health ratios, which company is more profitable? d. Which company has stronger valuation ratios? e. Overall, which company is better run and why? Your answers to questions “a” through “d” should be quite brief.

Typically, each will require only 2 or 3 sentences. The first sentence should provide a short factual response, clearly indicating which company has superior performance in the category. The other sentence(s) should provide a VERY 3 BRIEF elaboration on your answer, such as “We can see this by….” or “This is demonstrated through a comparison of…” Your response to question “e” should take a paragraph. Essentially, you are drawing together your analysis of the previous questions into a summary statement. However, you should also include any additional factors that may not have been specifically addressed. Note that it is possible that one of the companies may be better run than the other overall, but it is also possible that one may be superior in some categories and inferior in others. Your answer should present a clear statement in the opening sentence and then expand on, and defend, your position by referencing specific performance data for support. II. Merger Synergies a. If there was an acquisition, which company is the most likely acquirer? Why? b. Would you recommend a merger or acquisition to increase the moat strength of the combined companies? Why or why not? • If you support a merger or acquisition, identify 3 performance metrics that could be improved by a merger and explain how they would be improved.

Guidance for this is found on pages 101-110 of The CFO Guidebook. • If you do not support a merger or acquisition, explain your rationale and why the value of each company is best preserved/increased by remaining separate. The guidance for this is found on pages 111-117 of The CFO Guidebook. As you craft your response for the second part of the paper, pay attention to what is being asked in question “a” versus question “b”. Question “a” requires you to identify the most likely acquirer and then to explain your rationale. Even if you are arguing against a merger in your response to question “b”, you must still answer the questions based on the premise: …If there was an acquisition… Your answer should take one fairly robust paragraph of 5 to 6 sentences. You may also want to include a set of sub-bullets, if you are listing several reasons why Company A would be the most likely acquirer of Company B. The bullets will help the reader easily see the different reasons you are using to defend your position.

4 In responding to question “b”, you are presenting your recommendation for or against bringing the two companies together. Begin your response with a clear statement of your position. Take note that the question is specifically focused on Moat Strength, so it is a good idea to briefly review your findings from Assignment 1. Include two or three additional sentences to support your position. Then, answer one of the sub-bulleted questions, as explained in the bullets below: • Answer the first one if you are arguing for a merger/acquisition. Provide a clear explanation of what the combined company could do better (i.e., faster, cheaper, more efficient, etc.) Your answer must be based on real data from your analysis of their current performance AND it must include specific reference to the course materials. • Answer the second one if you are arguing against a merger/acquisition. Clearly state your position and rationale. You must explain why the challenges of a merger outweigh the benefits, and why a merger would not create synergies leading to a higher valuation for the combined company, as compared to what could be achieved by operating them independently. As above, your response must include specific references to course materials to support your position.

5 References Use the information below to format your in-text citations correctly. Note how the source number connects each citation with the References list on the last page of your paper. For more citation examples and a sample References page, see the Sample Professional Paper and the JWMI Writing Standards Guide. You can find both these documents in the Course Documents menu item in your Blackboard course. In-Text Citations Within the body of your paper, when concepts from specific sources are used, a citation with the author’s last name and the number of the citation in your References list is required: e.g., (Welch, 1). This is called an in-text citation. See below for two examples: “Leadership is about helping other people grow and succeed” (Welch, 1). In this example, notice the placement of quotation marks, cited text, and the period after the citation. The number 1 corresponds to the first entry on your References page.

When the reader looks at the References page, they should see the Welch book Winning listed as source number one (1). It is number 1 because it is the first source used in the paper, and throughout the paper this source will continue to be referred to as (1). If the next source you use in your paper is Bragg, then your citation is (Bragg, 2). If you then refer to Jack’s ideas again later in the paper, he remains (Welch, 1) because it is the first source used in the paper, and throughout the paper this source will continue to be referred to as (1). Linking Citations with your References Page At the end of your paper, include a page with a list of all your references. It must include an entry for every source that you have cited or quoted in your paper. The format of the references list varies by source type. There are examples of different source types in the sample References page at the end of this document. You may also refer to the Sample Professional Paper and/or the JWMI Writing Standards Guide. You can find both these documents in the Course Documents menu item in your Blackboard course. 6 Quotations Originality is an important aspect of graduate writing.

To ensure original thinking and avoid plagiarism, you should keep direct quotation to a minimum. Generally, keep your quotes to 25 words or less, and no more than 1-2 sentences. See below for an example of a direct quotation: “Leadership is about helping other people grow and succeed” (Welch, 1). In this example, notice the placement of quotation marks, cited text, and the period after the citation. The number 1 corresponds to the first entry on our References page. Paraphrasing When you paraphrase, you put the information from another writer in your own words. This is much preferable to quoting, as it shows your understanding of the material. In this case, you should use in-text citation, but quotation marks are not required. See below for an example of paraphrasing: In his Rule 3, Welch says that strong leaders display an impression of vitality and confidence (1).

Since the author’s name was used in the sentence, we do not need to include it again in the parentheses, so we just provide the Reference number, which is (1). Running head: FINANCIAL MANAGEMENT Financial Management JWI: Financial Management II Lou Melocchi October 25, 2020 1 FINANCIAL MANAGEMENT 2 RISK PROFILE FOR AMD AND INTEL COMPANIES The Intel Company has higher profile risks as it is exposed to more risks than the AMD Company. The intel company operates globally and hence exposed to more troubles in many jurisdictions such as the global or regional conditions which can harm their financial results, inadequate legal protection of their IP rights in other countries, government restrictions on nationalization of their operations or restrictions on their ability to repatriate earnings from a particular country and the local businesses and cultural factors of the countries which differ from their standards and practices, fluctuations in the market value of our domestic and international investments which can be negatively affected by liquidity, credit deterioration or losses, interest rate changes, financial results, political risk, sovereign risks, and other factors (Shapiro & Hanouna, 2019).

On the other hand, AMD depends on a small number of customers for a substantial portion of their business, and they expect that a small number of customers will continue to account for a significant part of their revenues in the future and there not exposed to as many risks as the Intel Company. Stage of the corporate lifecycle The AMD company is in its growth stage in the corporate’s lifecycle; a growth stage is when the product starts to increasingly gain acceptance among consumers, the industry, and the public in general (Madura, 2020). AMD has made several big bets to accelerate its rate of innovation in the industry. Such bets include; the newest Ryzen, ‘EPYC,’ and datacenter FINANCIAL MANAGEMENT 3 products, which contributed to an increase in their revenue and helped them gain share across their priority markets. The Intel company is at its maturity stage in the corporate’s lifecycle; this is where the sales are eventually at the peak and has already reached widespread accep…

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