Basic information about Applied Materials Inc.
The income statement (statement of earnings) reports on the performance of Applied Materials Inc., the result of its operating activities.
Comprehensive income is the change in equity (net assets) of Applied Materials Inc. during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.
The assets reports major classes and amounts of resources owned or controlled by Applied Materials Inc..
The liabilities and stockholders’ equity reports major classes and amounts of external claims on assets and owners’ capital contributions, and other internally generated sources of capital.
The cash flow statement provides information about Applied Materials Inc. cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on Applied Materials Inc. balance sheet.
Common-Size Financial Statements
Income statement components (revenues and expenses) shown as percentage of total sales.
Assets components shown as percentage of total assets.
Liabilities and stockholders’ equity components shown as percentage of total liabilities and stockholders’ equity.
Analysis of Financial Ratios
Measures the income of Applied Materials Inc. relative to its revenues and invested capital.
Examines Applied Materials Inc. capital structure in terms of the mix of its financing sources and the ability of the firm to satisfy its longer-term debt and investment obligations.
Evaluates revenues and output generated by the Applied Materials Inc. assets. Operating performance ratios describe the relationship between the Applied Materials Inc. level of operations and the assets needed to sustain operating activities.
Measures how efficiently Applied Materials Inc. generates revenues from its investments in fixed or total assets.
An approach to decomposing Applied Materials Inc. return on equity, return on assets, and net profit margin ratio as the product of other financial ratios.
Applied Materials Inc. operates in 3 segments: Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets.
Relative valuation technique determine the value of Applied Materials Inc. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.
To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital.
Free cash flow to the firm is the cash flow available to the Applied Materials Inc. suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.
Free cash flow to equity is the cash flow available to Applied Materials Inc. equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made.
Discounted Cash Flow (DCF) Valuation
CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.
The dividend discount model (DDM) is a technique for estimating the value of a share of Applied Materials Inc. common stock issue as the present value of all future dividends.
Main items of Applied Materials Inc. financial statements.
Applied Materials Inc. indicator of profitability, calculated as net income divided by revenue.
Applied Materials Inc. profitability ratio calculated as operating income divided by revenue.
Applied Materials Inc. profitability ratio calculated as net income divided by shareholders’ equity.
Applied Materials Inc. profitability ratio calculated as net income divided by total assets.
Applied Materials Inc. liquidity ratio calculated as current assets divided by current liabilities.
Applied Materials Inc. solvency ratio calculated as total debt divided by total shareholders’ equity.
Applied Materials Inc. activity ratio calculated as total revenue divided by total assets.
The P/E ratio tells analyst how much an investor in Applied Materials Inc. common stock pays per dollar of current earnings.
The P/BV ratio is interpreted as an indicator of market judgment about the relationship between a company required rate of return and its actual rate of return.
An rationale for the P/S ratio is that sales, as the top line in an income statement, are generally less subject to distortion or manipulation than other fundamentals such as EPS or book value. Sales are also more stable than earnings and never negative.
Analysis of Components of Financial Statements
Financial Reporting Quality
Financial reporting quality relates to the accuracy with which Applied Materials Inc. reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Applied Materials Inc. earnings.