Advanced Semiconductor, Inc. (ASI) was founded in 2005 to develop and market sem
ID: 2749555 • Letter: A
Question
Advanced Semiconductor, Inc. (ASI) was founded in 2005 to develop and market semi-conductor chips used in smart phones. Like virtually all of the companies that it competes against, ASI is a “fabless” semi-conductor company that outsources the actual manufacture of its semi-conductor chips to large, low-cost, semi-conductor chip fabrication companies in Taiwan, China and South Korea.
Neither ASI nor any of its direct competitors has any long-term debt outstanding. In the past three years, the company has not repurchased any shares of its own common stock, sold any new shares to investors, or made a significant acquisition. Currently, neither ASI nor any of its direct competitors pay any dividends.
a) Based on the summary information provided above and in Exhibit A, how would you assess ASI’s financial and business performance over the past three years?
b) Describe ASI’s business strategy. How would you contrast the company’s strategy with the apparent strategy of most of its competitors? Do you think ASI’s strategy is sound?
Global Finance For Managers Fall 2015 Term 2 Final Exam
Exhibit A
Advanced Semiconductor, Inc. (ASI)
Statement of Operations
($ millions)
For the year ended December 31,
2012
2013
2014
Sales
$ 254.7
$ 298.6
$ 354.0
Cost of Sales
124.8
140.6
163.8
Gross Profit
129.9
158.0
190.2
Expenses:
Research & Development
40.2
48.1
57.6
Selling, General & Administrative
66.5
78.4
92.9
Total Expenses
106.7
126.5
150.5
Operating Profit
23.2
31.5
39.7
Interest Income
3.0
2.6
2.3
Profit before Tax
26.2
34.1
42.0
Income Taxes
9.4
12.3
15.1
Net Income
$ 16.8
$ 21.8
$ 26.9
Return on Average Equity
9.8%
11.1%
12.3%
Averages for ASI's peer group of competitors for the year ended December 31,
2013
2014
Annual Growth in Sales
14.1%
13.8%
Gross Profit as a % of Sales
52.8%
51.4%
Research & Development Expense as a % of Sales
13.8%
12.5%
Selling, General & Admin. Expense as a % of Sales
27.2%
27.3%
Operating Profit as a % of Sales
11.8%
11.6%
Net Income as a % of Sales
8.4%
8.2%
Return on Average Equity
13.3%
13.0%
Global Finance For Managers Fall 2015 Term 2 Final Exam
Exhibit A
Advanced Semiconductor, Inc. (ASI)
Statement of Operations
($ millions)
For the year ended December 31,
2012
2013
2014
Sales
$ 254.7
$ 298.6
$ 354.0
Cost of Sales
124.8
140.6
163.8
Gross Profit
129.9
158.0
190.2
Expenses:
Research & Development
40.2
48.1
57.6
Selling, General & Administrative
66.5
78.4
92.9
Total Expenses
106.7
126.5
150.5
Operating Profit
23.2
31.5
39.7
Interest Income
3.0
2.6
2.3
Profit before Tax
26.2
34.1
42.0
Income Taxes
9.4
12.3
15.1
Net Income
$ 16.8
$ 21.8
$ 26.9
Return on Average Equity
9.8%
11.1%
12.3%
Averages for ASI's peer group of competitors for the year ended December 31,
2013
2014
Annual Growth in Sales
14.1%
13.8%
Gross Profit as a % of Sales
52.8%
51.4%
Research & Development Expense as a % of Sales
13.8%
12.5%
Selling, General & Admin. Expense as a % of Sales
27.2%
27.3%
Operating Profit as a % of Sales
11.8%
11.6%
Net Income as a % of Sales
8.4%
8.2%
Return on Average Equity
13.3%
13.0%
Explanation / Answer
a) ASI's financial position and business performance is stable and keep on growing in itself.Statement of operation shows that company will generate more profit in near future.
Sales revenue over past 3 years is increasing. Net income available to equity is increasing as well over 3 years which shows that equity holder got good earning as per their shares. Return on Average equity is growing which indicates to the fact that the ASI is able to generate profit from its shareholder investment.
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