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NVIDIA Corp. (NVDA)
Analysis of Investments
Difficulty: Advanced
Investment Accounting Policy
Marketable securities consist of highly liquid debt investments with maturities of greater than three months when purchased. NVIDIA generally classifies the marketable securities at the date of acquisition as available-for-sale. These debt securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income or loss, a component of shareholders’ equity, net of tax. The fair value of interest-bearing debt securities includes accrued interest. Any unrealized losses which are considered to be other-than-temporary impairments are recorded in the other income or expense, net, section of NVIDIA’s Consolidated Statements of Income. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in the other income or expense, net, section of NVIDIA’s Consolidated Statements of Income.
All of NVIDIA’s available-for-sale debt investments are subject to a periodic impairment review. NVIDIA records a charge to earnings when a decline in fair value is significantly below cost basis and judged to be other-than-temporary or have other indicators of impairments. If the fair value of an available-for-sale debt instrument is less than its amortized cost basis, an other-than-temporary impairment is triggered in circumstances where (1) NVIDIA intends to sell the instrument, (2) it is more likely than not that NVIDIA will be required to sell the instrument before recovery of its amortized cost basis, or (3) a credit loss exists where NVIDIA does not expect to recover the entire amortized cost basis of the instrument. In these situations, NVIDIA recognizes an other-than-temporary impairment in earnings equal to the entire difference between the debt instruments’ amortized cost basis and its fair value. For available-for-sale debt instruments that are considered other-than-temporarily impaired due to the existence of a credit loss, if NVIDIA does not intend to sell and it is not more likely than not that NVIDIA will not be required to sell the instrument before recovery of its remaining amortized cost basis (amortized cost basis less any current-period credit loss), NVIDIA separates the amount of the impairment into the amount that is credit related and the amount due to all other factors. The credit loss component is recognized in earnings while loss related to all other factors is recorded in accumulated other comprehensive income or loss.
Source: 10-K (filing date: 2019-02-21).
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
NVIDIA Corp., adjustment to Net Income
US$ in millions
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).
Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)
NVIDIA Corp., adjusted ratios
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | NVIDIA Corp.’s adjusted net profit margin improved from 2017 to 2018 and from 2018 to 2019. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | NVIDIA Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | NVIDIA Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019. |
NVIDIA Corp., Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).
2019 Calculations
1 Net profit margin = 100 × Net income ÷ Revenue
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenue
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | NVIDIA Corp.’s adjusted net profit margin improved from 2017 to 2018 and from 2018 to 2019. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).
2019 Calculations
1 ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Shareholders’ equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders’ equity. | NVIDIA Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).
2019 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | NVIDIA Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019. |