According to the carried out research analysis it is found out that AMD is not placed at a viable financial position. Therefore, it means that HTC will be putting its financial obligations under risk in case it opts to enter into the long term commitment it desires. The ratio, DuPont and Stock performance analysis conducted, places AMD at an unviable position that is unfavorable in terms of growth and development as a whole. As the Chief Financial Officer of HTC, it is my obligation to postulate the credibility of the matter at hand and as analysis depicts, it is irrelevant and risky to enter into the commitment as a whole.
Advanced Micro-Devices Company is a firm which deals in the manufacture of semiconductors to potential markets across the globe. The Company deals with x86 microprocessors for both consumer and commercial markets altogether. The firm also manufactures graphics and other multimedia products for both desktop and mobile devices. It was established in 1969 and initiated with the production of logic chips, RAM chips before venturing into microprocessors (Manta.Com, 2010).
In 2006, the company acquired ATI Technologies and together with the Abu-Dhabi government formed a venture known as Global Foundries Inc. AMD is the second largest manufacturer and supplier of microprocessor based on the X6 architecture. It is also the largest manufacturer and distributor of graphics processing devices. In 1989, the Company bought 8.6 % of Spansion shares: a Company dealing with the production of flash memory (Rodengen, 1998).
It should be noted that computation of relevant ratios is needed in determining the task at hand. These ratios cover the entire task at hand and they include both Profitability and Liquidity ratios. The following are the computations needed in determining the credibility of the company under study.
The resultant computations of the accounting ratios depict a promising trend in the profitability of the company status in the period of 2009/2010 as compared to the accounting period 2010/2011. It is also fair to assume that the liquidity position and the DuPont position of the company have also worsened in the accounting period 2010/2011 as compared to 2009/2010. This is a clear indication that AMD has increased its trading base at the expense of its current working capital (AMD 2011).
This is an indication of overtrading and is usually considered unpromising when it is carried out for long-term and without capital adjustments, the Company is likely to decrease its normal operations or production level.
In the accounting period 2009/2010, the Company had a total of 7,389 stockholders and the stocks traded at high value of $ 3.78 with lows hitting $ 1.86 (AMD, 2009). In 2010, the stock prices shifted to high of $ 10.04 and low of $ 7.10 while in 2011 the stock prices hit a high of $9.58 and low of $7.34 altogether (AMD, 2010).
According to the aforementioned statistics, it is evidently fair to assume that the Company’s value of stock deteriorated after a few years of listing in the New York Stock Exchange. It is assumedly fair to postulate that the company is experiencing a surge in the prices of its stock shares altogether (Kastner, 2011).
It will not be of sufficient financial strength that HTC enter into a long-term commitment with AMD. This is due to the fact that the Company has a lower profitability index and liquidity ratios which are not favorable or rather promising to the long-term commitment. Such risks as insolvency and closure of operations as well as losses have a likelihood of occurrence should the AMD management overlook the aspect of capital adjustment. Taking into account the fact that HTC is expecting to benefit in terms of growth and development, from the commitment, it is not clear whether these desires will come to pass. All in all, it is economically unviable for HTC to enter into the commitment with the Company certainly because of its downward profitability trend altogether.
It is fair to indicate that the analysis provided herein is vast enough to discourage the postulated long term commitment between HTC and AMD. Results obtained by the analysis indicate a negative growth on the part of AMD and it will not be economically viable for HTC to enter into the desired long-term commitment. This is as a result of the overtrading activities experienced by AMD as a whole.