The Intel story emphasizes how balance sheets can help insiders and outsiders assess companies’ financial ability to execute their planned strategies, meet their financial obligations, and respond quickly to unforeseen opportunities and challenges.
We often think of balance sheets as pictures of a company’s financial position on a specific date. However, they tend to be fuzzy pictures. In fact, they are more like x-rays, MRIs, or ultrasound medical images than clear photographs. For instance, like medical images, Intel’s balance sheets only show us those aspects of the company’s financial condition that we can measure reliably: a good deal of information about its financial condition is missing or measured with varying degrees of imprecision.
Also like medical images, balance sheets must be interpreted in their broader context—in this case the company’s business (analogous to the patient’s medical history). Still, just as medical images help doctors make informed judgments about patients’ health, balance sheets, while imperfect, do help insiders and outsiders make informed assessments of companies’ financial condition. Finally, we often describe a firm’s financial condition in health terms: a highly successful company is strong, competitive, flexible, and adaptive. In contrast, the financial condition of a failing company is weak, sick, inflexible, or on life support.
Let’s introduce balance-sheet terms and concepts, then apply these to Intel and other companies.
Source: Intel Museum www.intel.com. Intel ® is a registered trademark of Intel Corporation.
All brands and product names are trademarks of their respective owners.