Managerial Accounting. Qualcomm Incorporated And Broadcom
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Qualcomm Incorporated and Broadcom Limited are two companies operating in the semiconductor industry. Qualcomm Incorporated was incorporated in 1985 and it develops and supplies different digital communication technology products for cellular wireless applications. Broadcom Limited, a result of a partnership between Broadcom Corporation and Avago, designs, develops and distributes semiconductor devices including digital, CMOS and analog based products. The purpose of this paper is to compare the financial position of the two companies by using ratio analysis of each company’s financial statements for year ended 2016. Consequently, various financial ratios will be evaluated including: profitability ratios, liquidity…show more content… However, Qualcomm is in a slightly better position compared to Broadcom.
b. Quick ratio
The quick ratios for the two companies is calculated below:
Cash + cash equivalents + short term investments (marketable securities) + current receivables/ current liabilities Qualcomm Broadcom
2016 5,946,000,000 + 12,702,000,000 + 2,219,000,000 / 7,311,000,000 =2.99 3,097,000,000 + 2,181,000,000 / 3,078,000,000 = 1.71
2015 7,560,000,000 + 9,761,000,000 + 1,964,000,000 / 6,100,000,000 = 3.21 1,822,000,000 + 1,019,000,000 / 1,119,000,000 = 2.54
The analysis above shows that while both companies can easily finance their short term debts using highly liquid current assets, Qualcomm is in a better position.
2. Efficiency or turnover ratios
Turnover ratios help to measure the ability of a firm to sell inventory and collect receivables. For Qualcomm and Broadcom, the turnover ratios are as follows:
a. Accounts receivable turnover ratio
Sales/accounts receivables Qualcomm Broadcom
2016 23,554,000,000/ 2,219,000,000 = 10.61 13,240,000,000 /2,181,000,000 = 6.07
2015 25,281,000,000/ 1,964,000,000 = 11.85 6,824,000,000 / 1,019,000,000 = 6.70
Both Qualcomm and Broadcom can collect payments for accounts receivables multiple times in a year but Qualcomm has the highest value implying that its average collection period is shorter.
b. Inventory turnover ratio
Sales/ inventory Qualcomm Broadcom
2016 23,554,000,000/ 1,556,000,000 = 14.49 13,240,000,000/1,400,000,000 = 9.45