Accounting assignment
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hp.docxHistory & Background
Hewlett- Packard Company, later shortened to Hewlett-Packard - Popularly known as HP- was founded by Electrical engineer William “Bill” Redington Hewlett and Engineer David “Dave” Packard in 1939, in a garage in Palo Alto, California. Initially, the company produced and manufactured a line of electronic test equipment and later switched its focus on producing computer software and hardware for both consumers and businesses. From 2007 to 2013 HP was the world’s leading PC manufacturer before losing its ranking to Lenovo. Today, Hewlett Packard Enterprise has transformed into a technology solutions provider that offers converged systems, and cloud based services. Its product line comprises of servers, storage devices, networking, converged systems, software services, customized financial solutions and cloud service based products. Its company’s services include IT consulting services, IT support services,and education and training services.Additionally, HP offers its solutions to commercial and large enterprise companies. The company markets its products through resellers, distribution partners, OEMs (original equipment manufacturers), independent software vendors and system i
Part 1: History & Background - 1.5 Pages - (By Ebony)
· How they began
· How they are now
Part 2: Financial Highlights - (by Rachel)
· Tell the audience how strong the company is by giving synopsis of financial statements
· Total Assets, Liabilities, Revenues, Net Income, Earning per share, & dividend policy.
***Please read the message on the side. You need to have this Total Revenues (sales), Net profit (Income) , Total Assets Total Liability, Shareholder’s Equity, Cash From Operating Activities ( You are missing the ones in red)
|
|
2014 |
2015 |
2016 |
|
Total Assets (USD) |
65,071.00 |
79,916.00 |
79.629.00 |
|
Total Liabilities (USD) |
28.295.00 |
46,381.00 |
48,181.00 |
|
Revenues |
55,123.00 |
52,107.00 |
50,123.00 |
|
Net Income |
1,648.00 |
2,461.00 |
3,161.00 |
|
|
Currency |
April 01,2016 |
July 01,2016 |
October 01,2016 |
January 01,2017 |
Ratio Type |
|
EPS (Earnings per Share) |
USD |
0.18 |
1.33 |
0.18 |
0.16 |
Equity Ratios |
· Dividend policy:
The board of Hewlett Packard Enterprise authorized a cash dividend for the first quarter of the 2016 fiscal year of 5.5 cents per share. The board of HP authorized a common stock dividend of 12.4 cents. That implies a dividend yield of 1.6% for Hewlett Packard Enterprise and 3.6% for HP, as of Wednesday’s close. Both dividends are payable Jan. 6, 2016, to shareholders of record on Dec. 9.
· Shareholder's Equity: HP Inc.'s total HP stockholders' equity (deficit) increased from 2014 to 2015 but then declined significantly from 2015 to 2016.
· Cash from Operating Activities ( USD)
_ 2014: 6,911
_2015: 3,911
_2016:4,958
Part 3: Financial Analysis ( By Neddy)
INCOME STATEMENT Annual Income Statement Period Ending: Trend 10/31/2016 10/31/2015 10/31/2014 Total Revenue $50,123,000 $52,107,000 $55,123,000 Cost of Revenue $35,507,000 $37,168,000 $39,486,000 Gross Profit $14,616,000 $14,939,000 $15,637,000 Operating Expenses Research and Development $2,298,000 $2,338,000 $2,197,000 Sales, General and Admin. $8,419,000 $9,047,000 $8,717,000 Non-Recurring Items $1,414,000 $1,179,000 $1,482,000 Other Operating Items $755,000 $852,000 $906,000 Operating Income $4,150,000 $1,523,000 $2,335,000 Add'l income/expense items $2,737,000 $0 $0 Earnings Before Interest and Tax $4,079,000 $1,470,000 $2,244,000 Interest Expense $0 $0 $0 Earnings Before Tax $4,079,000 $1,470,000 $2,244,000 Income Tax $918,000 ($991,000) $596,000 Minority Interest $0 $0 $0 Equity Earnings/Loss Unconsolidated Subsidiary ($76,000) ($2,000) $0 Net Income-Cont. Operations $3,085,000 $2,459,000 $1,648,000 Net Income $3,161,000 $2,461,000 $1,648,000 Net Income Applicable to Common Shareholders $3,161,000 $2,461,000 $1,648,000
BALANCE SHEET Period Ending: Trend 10/31/2016 10/31/2015 10/31/2014 Current Assets Cash and Cash Equivalents $12,987,000 $9,842,000 $2,319,000 Short-Term Investments $0 $0 $0 Net Receivables $9,832,000 $11,456,000 $11,397,000 Inventory $1,774,000 $2,198,000 $1,884,000 Other Current Assets $4,324,000 $6,468,000 $6,431,000 Total Current Assets $28,917,000 $29,964,000 $22,031,000 Long-Term Assets Long-Term Investments $15,864,000 $10,875,000 $6,503,000 Fixed Assets $9,636,000 $9,886,000 $8,520,000 Goodwill $24,178,000 $27,261,000 $25,960,000 Intangible Assets n $1,084,000 $1,930,000 $2,057,000 Other Assets $0 $0 $0 Deferred Asset Charges $0 $0 $0 Total Assets $79,679,000 $79,916,000 $65,071,000 Current Liabilities Accounts Payable $13,718,000 $15,520,000 $13,026,000 Short-Term Debt / Current Portion of Long-Term Debt $3,532,000 $691,000 $894,000 Other Current Liabilities $5,281,000 $5,782,000 $5,840,000 Total Current Liabilities $22,531,000 $21,993,000 $19,760,000 Long-Term Debt $12,608,000 $15,103,000 $485,000 Other Liabilities $13,022,000 $8,902,000 $7,654,000 Deferred Liability Charges $0 $0 $0 Misc. Stocks $0 $0 $0 Minority Interest $70,000 $383,000 $396,000 Total Liabilities $48,231,000 $46,381,000 $28,295,000 Stock Holders Equity Common Stocks $17,000 $0 $0 Capital Surplus $35,248,000 $0 $0 Retained Earnings $2,782,000 $0 $0 Treasury Stock $0 $0 $0 Other Equity ($6,599,000) $33,535,000 $36,776,000 Total Equity $31,448,000 $33,535,000 $36,776,000 Total Liabilities & Equity $79,679,000 $79,916,000 $65,071,000
CASH FLOW Annual Income Statement Period Ending: Trend 10/31/2016 10/31/2015 10/31/2014 Net Income $3,161,000 $2,461,000 $1,648,000 Cash Flows-Operating Activities Depreciation $3,775,000 $3,947,000 $4,144,000 Net Income Adjustments ($1,488,000) ($520,000) $1,766,000 Changes in Operating Activities Accounts Receivable $690,000 ($384,000) $1,414,000 Changes in Inventories $34,000 ($424,000) $69,000 Other Operating Activities ($1,851,000) ($2,222,000) ($1,906,000) Liabilities $637,000 $803,000 ($224,000) Net Cash Flow-Operating $4,958,000 $3,661,000 $6,911,000 Cash Flows-Investing Activities Capital Expenditures ($3,280,000) ($3,344,000) ($3,620,000) Investments ($71,000) $55,000 $83,000 Other Investing Activities $3,770,000 ($2,124,000) $563,000 Net Cash Flows-Investing $419,000 ($5,413,000) ($2,974,000) Cash Flows-Financing Activities Sale and Purchase of Stock ($2,543,000) $0 $0 Net Borrowings $170,000 ($233,000) ($265,000) Other Financing Activities $0 $0 $0 Net Cash Flows-Financing ($2,232,000) $9,275,000 ($3,800,000) Effect of Exchange Rate $0 $0 $0 Net Cash Flow $3,145,000 $7,523,000 $137,000
FINANCIAL RATIOS
Performing ratio analysis in a company is good because it can detect a problem early. It also helps the company know which categories are doing better than the other. Some of the ratio categories are;
Liquidity ratios: Liquidity ratios tell us how easily a company can pay its debt. These ratios are calculated from the balance sheet.They tell us how much of your company stuff can be easily changed into cash within the next twelve months, so that it can pay debts that need to be paid in 12 months. Examples of this are;
1. Current Ratio = Current Assets 2. Quick Ratio = Cash + Marketable Securities + Receivables
Current Liabilities Current Liabilities
3. Cash Ratio = Cash + Cash Equivalents
Current Liabilities Higher ratio = less risk = better.
Profitability ratios: Profitability ratios tell us how good a company is at making money. These ratios show which areas of the company’s business are more profitable compared to the others. Gross Profit Margin indicates the profit a company makes from sales. ROA, the usefulness of an asset in generating profit and ROE, the ability to utilize the shareholder’s investment to earn profit.
4. Gross Profit Margin Ratio = Gross Profit 5. Net Profit Margin Ratio = Net Profit or Income
Net sales or Revenue Net Sales or Revenue
6. ROI Ratio = Net Profit or Income 7. ROA Ratio = Net Profit or Income
Total Assets Total Assets
8. ROE Ratio = Net Profit or Income Higher ratio = better.
Shareholder’s Equity
Leverage/Solvency Ratios: This ratio shows how much debt the company is using to make the company run and stay alive as well as its ability to pay its debt. It also tells us how much percent of a company’s assets are paid for by debt. These are;
9. Debt Ratio = Total Debt 10. Debt to Equity Ratio = Total Liabilities
Total Assets Low debt ratio = Safer Shareholder’s Equity
Activity Ratios: This ratio shows the productivity of a company’s operations. Shows how effectively the company is converting sales into cash or utilizing its fixed assets.These are;
11. Total Asset Turnover Ratio = Net Revenue or sales
Total Assets
Cash Flow Ratio: This ratio shows the quality of earnings of a company and ability to survive in the market as far as its performance, is concerned. This is
12. Cash Flow Margin Ratio = Cash from Operating Activities
Net sales or Revenue
APPLE INC (APPL) Financials 2016 2015 2014
Total Revenues (sales) 215,639 000 233, 715 000 182, 795 000 Net profit (Income) 45, 687 000 53, 394 000 39, 510 000 Total Assets 321, 686 000 290, 345 000 231 839 000 Total Liability 193, 437 000 170, 990 000 120,292 000 Shareholder’s Equity 128, 249 000 119, 355 000 111, 547 000 Cash From Operating Activities 65, 824 000 81, 266 000 59, 713 000
Financial Ratios of Hewlett Packard Enterprise and its Competitor Apple Inc
Hewlett Packard Enterprise(HPE) Financial Ratios. APPLE INC (AAPL) Financial Ratios.
Period Ending: 10/31/2016 10/31/2015 10/31/2014 10/31/2016 10/31/2015 10/31/2014 Liquidity Ratio
1. Current Ratio 128% 136% 111% 135% 111% 108% 2. Quick Ratio 120% 126% 102% 133% 108% 105% 3. Cash Ratio 58% 45% 12% 85% 52% 40%
Profitability Ratio
4. Gross profit Margin 29% 29% 28% 39% 40% 39% 5. Net Profit Margin 6% 5% 3% 21% 23% 22%
6. ROI(Return on Investment) 4% 3% 3% 14% 18% 17%
7. ROA(Return on Assets) 4% 3% 3% 14% 18% 17%
8. ROE (Return on Equity) 10% 7% 5% 36% 45% 35%
Leverage/Solvency Ratio
9 Debt Ratio 61% 58% 43% 60% 59% 52%
10. Debt to Equity Ratio 153% 138% 77% 151% 143% 108%
Activity Ratio
11. Total Asset Turnover Ratio 63% 65% 85% 67% 81% 79%
Cash Flow Ratio
12. Cash Flow Margin Ratio 10% 7% 13% 31% 35% 33%
Interpretation of the ratios and Comparison ( Hewlett Packard Enterprise & Apple Inc.
Financial ratio analysis indicates when a company is doing good or if it is in a financial crisis. These ratios can help a company rectify the problem in time. Companies can therefore focus more on the areas that are more successful. Comparing the two companies;
Hewlett Packard Enterprise Apple Inc
Liquidity Ratios: Higher ratio = lesser rie = better.
-The trend is not constant except for the cash Ratio - The trend is constant for all three (Current,Quick & Cash) ratios
- The ratios are high except the cash ratio - The ratios are high
Both companies can easily convert their assets into cash and pay their debt. However Apple Inc is more reliable than HPE
Profitability Ratios: The higher the ratio, the better.
-The trend is constant but ratios are lower than Apple Inc - The trend is not constant but ratios higher than for HPE
Apple Inc ratio percentages is higher than for HPE. Apple Inc is therefore better compared to HPE in making money.
Leverage/Solvency Ratios: Having Low debt ratio is safer
-The trend is not constant but ratios are lower than Apple Inc - The trend is not constant but ratios higher than for HPE
From these ratios, Apple Inc has a high debt ratio than HPE. Apple Inc runs its company on more debt than HPE does.
Activity Ratios:
-The ratios are falling by the year - The ratios are not constant but higher than HPE
These ratios show that Apple Inc is doing well as far as converting sales into cash than Hewlett Packard.
Cash Flow Ratios: Higher Cash Flow ratio is better.
-Low percentage ratios - Low Percentage ratios but better than HPE
Low ratios indicate that the company’s performance is not so good. Apple Inc however is performing better than HPE.
Overall Apple Inc is doing better in the market compared to HPE.
· What's their industry average compared with other companies
Part4: Summary ,Conclusion, Recommendation (by Ling)
· Your summary
· What is wrong with the company
· Recommendation: what should the company do to come out of the situation it is in? etc
