Presented here is basic financial information from the 1998 annual reports of Intel and Advanced Micro Devices (AMD), the two primary manufacturers of silicon chips for personal computers.

Instructions

(a) Calculate the receivables turnover ratio and average collection period for both companies. Comment on the difference in their collection experiences.

(b) Calculate the January 1 and December 31 ratio of allowance for doubtful accounts to gross accounts receivable (credit risk ratio) for each company. Comment on any apparent differences in their credit-granting practices.

(in millions) Sales Allowance for doubtful accounts, Jan. 1 Allowance for doubtful accounts, Dec. 31 Accounts receivable balance (gross), Jan. 1 Accounts receivable balance (gross), Dec. 31 Intel AMD $26,273 $2,542.0 65 11.2 62 12.7 3,503 340.3 3,589 428.2