HEWLETT PACKARD CORPORATION

Balance Sheet as at December 31, _ _ _ _ _.
2006 $ in '000 2005

Assets
Current Assets
Cash & Cash Equivlent Short-Term Investment Account Receiveables Financing Receiveables Inventory Other Current Assets 16,400 22 10,873 2,440 7,750 10,779 13,911 18 9,903 2,551 6,877 10,074

Total Current Assets Non-Current Assets
Property, Plant & Equipments Long term financing Receivables Goodwill Purchased Intengible assets

48,264
6,863 6,649 16,853 3,352

43,334
6,451 7,502 16,441 3,589

Total Non-Current Assets TOTAL ASSETS

33,717 81,981

33,983 77,317

EQUITY AND LIABILITIES
CURRENT LIABILITIES
Notes Payable and S.Term Borrowing Accounts Payables Employee Compensation & Benefits Taxes on earnings Deferred Revenue Accrued Restructuring Other Accrued Liabilities 2,705 12,102 3,148 1,905 4,309 547 11,134 1,831 10,223 2,343 2,367 3,815 1,119 9,762

Total Current Liabilities NON-CURRENT LIABILITIES
Long-term Debt Other Liabilities Commitments & Contingencies

35,850
2,490 5,497 -

31,460
3,392 5,289 -

Total Non-Current Liabilities Total Liabilities SHARE CAPITAL AND RESERVES
Preferred Stock Common Stock Additional Paid in Capital Prepaid Stock Repurchase Retained Earnings Other Accumulated Comprehensive Income (Loss)

7,987 43,837

8,681 40,141

27 17,966 (596) 20,729 18

28 20,490 16,679 (21)

Total Shareholder's Equity TOTAL EQUITY AND LIABILITIES

38,144 81,981
-

37,176 77,317
-

HEWLETT PACKARD CORPORATION
Profit & Loss Account For the Year Ended December 31, _ _ _ _ _.
2006 2005 $ in '000 Net Revenue Products Services Financing Income Total Net Revenue 73,557 17,773 328 68,945 17,380 371 64,046 15,470 389 2004

91,658

86,696

79,905

Cost & Expenses Cost of products Cost of Services Financing Interests Research & Developments Selling, General & Administrative Amortization of Purchased Intangible Assets Restructuring charges In-process Research and Development Charg Pension Curtailment Acquisition related charges Total Operating Expenses Earning from operations Interest & other, Net Gains (Losses) on Investments Dispute Settlements Earnings Before Taxes Provision for Taxes Net Earnings 55,248 13,930 249 3,591 11,266 604 158 52 85,098 6,560 606 25 7,191 993 6,198 83,223 3,473 189 (13) (106) 3,543 1,145 2,398 52,550 13,674 216 3,490 11,184 622 1,684 2 (199) 48,659 11,962 190 3,563 10,496 603 114 37 54 75,678 4,227 35 4 (70) 4,196 699 3,497

Net Earnings per share; Basic Diluted 2.23 2.18 0.83 0.82 1.16 1.15

Weighted average shares used to compute net earnings per share Basic Diluted 2,782 2,852 2,879 2,909 3,024 3,055

HEWLETT PACKARD CORPORATION
Financial Analysis 2006 2005

Liquidity Ratios
1.

Net Working Capital:
= Current Assets - Current Liabilities = = 48,264 - 35,850 = 43,334 - 31,460

12,414

11,874

The Company's net working capital increased over the period. In 2005, the company's net working capital was $ 11,874 million, which now increased 4.55 % and reached up to $ 12,414 million in 2006 .
= Current ets Curr nt ia ilities Current Li bilities
48,264.00 35,850.00 43,334.00 31,460.00

The company's current ratio decreased in current year 2006. Company's Working Capital increased but the its current ratio about to meet Company's ability current liabilities out of its current assets decreased from .3 to .3 .
Curr t ssets - Inventory t I v t r Current Curr t Li bilities Current i iliti

=

1.13

1.16

Company's Quick ratio show that the company's ability to made payments its current liabilities out of its most current assets also decreased in the current financial year 2006 as campared to 2005. In Short, the HP Company's liquidity ratio results shows that the company's net working capital increased but the company ability to pay its currents liabilities out of its currents assest decreased as compared to the last financial year of 2005.

tilizatio ) atios Activity (Asset Utilization) Ratios
1.

=
=

91,658.00 10,873.00

8.43

times

Accounts Receiveable turnover ratio show that Company net sale increased, the company's account receiveable also increased but the accounts receiveables turnover reduced. In this regard, company needed to be evaluate its policies in order to increase Account Receiveable turnover

=
=

365 8.43 43.30 days

41.69

As company's accounts receiveable turnover ratio slightly decline, this decline affect the company's collection period from the receiveables. The company's collection perioed increased as compared to 2005 from 41.69 (almost 42 days) to 4 . 0 (almost 4 days).
3.

I e t r r er ti : Inventory Turnover Ratio:

= =
= 6 , 69,427 7,750

Co t ood old Cost of Good Sold I v tory
66, 66,440 6,877

8.96

times

9.66

Inventory Turnover ratio show that that the company's inventory turnover reduced as compared to the last financial year. In 2005, it was 9.66 times that now decline 7.24% and come down to 8.96 times.

=
=

365 8.96 40.74 days

Due to decrease in Inventory turnover ratio, this affect the company's inventory age that now increase 7.8 % from 7.78 days to 40.74 days that is holding of money in inventroy, instead of investing in other business operations.

Activity (Asset tilizatio ) Ratios (Co 't)

=
=

.

+

.

84. 4

s

9.47

a s( l

st

=

1.1

1.1

The 's assets t r er res lts show that the compa 's remains the constant. rnover company's remai s There is not change in assets of the company in the c rrent financial year.

1.

Debt Ratio:

=
43,837 81,981

Total ia ilities Total Assets
40,141 77,317

=
=

0.

0.

The debt ratio o the company sho that the company s debt liability against its total assets slightly increased as to last year rom 0.52 to 0.5 . This sho that the share o debt in company increased.

2.

Debt Equity Ratio:

=
43,837 4 ,8 7 38,144

Total ia ilities Total Equity
40,141 37,176

=
=

1.15

1.08

ike the debt ratio o the company, the debt equity ratio also sho that company s debt liability against its shareholders equity increased by 6.48 as compare to last year rom 1.08 to the 1.15

3.

L-Term Debt to Equity Ratio:

=

ong Term e t Total Shareholder Equity
2,490 38,144

=
=

3,392 37,176

0.07

0.09

The Long Term debt to share holders equity ratio results show that the company's long term debts against its shareholders equity reduced. In 2005 that was 0.09 that now decreased to 0.07 which is in favour of shareholders.

Profita ility Ratios
1.

Gross Profit Margin Ratio:

=
22,231 91,658

Gross Profit Net Sale
20,256 86,696

=
=

0.24

0.23

HP gross profit margin slightly increased in current financial year. In 2005, it was 0.2 of the total sale and now it increase up to 0.24 with difference of 0.01. Operating Profit Ratio:

2.

=

Earning Before Interest & Taxes (EBIT) Net Sale
7,191 91,658 3,543 86,696

=
=

0.08

0.04

Like gross profit margin, the company's current years operating profit increased. This year company's operating profit double increase as compare to last year operating profit. In 2005 the HP's operating profit was 0.04 of net sale that now is 0.08.
Net Profit Net Sale
6,198 91,658 2,398 86,696

3.

Profit Margin Ratio:

=

=
=

0.07

0.03

The company's profit margin also increased from 0.0 to 0.07 of net sale in this current year. This sho that the company take necessary steps to controll its expenses to increase its profits.

Profita ility Ratios ( Co 't ) ility 't
4.

=

6,1 1,

1

=

0.08

The return on investment (Assets) of HP corporation increased more then double as last year. Last year the return was 0.0 of total assets (Investment) that now raised to 0.08.

5.

Return on Equity:

=

Net income Total Shareholder's Equity
6,198 38,144 2,398 37,176

=

=

0.16

The return on equity of HP corporation is also increased more then double of last year. Last year the return on equity was 0.06 that now raised to 0.16.

Market Value atios Mar et value ratio are final group of ratios that relates the firm's stock prices stoc Market earning (or book value) per share.

Year

2004 2005 2006

41.64 40.31 48.25

1.

Earning per Share
=

=

Net Income - Preferred

Common Stock Outstanding
1.45 1.39

Where as some ratio are declining in 2005 & 2006 but the earning per share of sh continuously increased over the time period specially time the company make sharp increase in earnin per share.
2.

Price Earning Ratio: arning
=

=

Market Price per Share rice er are Earning per Share er are
33.35 29.02

As e As we noted that earning per share increased, similarly the price earning ratio also In 2005, the E atio as 29.02 that no raise ot . 5.
3.

0.01

Similarly, as the earning per share price earning ratio of the company increases from . to now . . shares ook val e also increase in

®

Book Value Per Share

=

Total Stockholder's equity - Preferred Stock T tal t ckh l er's equit referre t ck Share Outstandings utstan ings

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®

¢¡

°

¥ § ¥¦ ¤ ¦ §

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$

3500 3507 3511
i idend

   

Mkt. Price

O.Stan ing S.hol ers (Million)

Net Income $ in Million

œ › œœ ™˜› š

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Return on Investment: Retur o I vestment:

=

Net income Total T tal Assets

,

, 1

0.03

0.06

4847 4872 5080

0.01

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Lever ge (Solvency, Long-Term Debt) (S lve cy,

tios

r

v

q

=

91,658 81,981 81,981

yv

† …

z z

p

6.

Total sset T r over tio: Tot l Asset Turnover Ratio:

=

o moo mn

Sale Sal Total Assets otal t

e f dk “ d ˜ lg ˜“

The O erati c cle f the erati cle a s) t . a s ( al st

a i crease i the c rre t ear fr crease rre ear a s) that i crease al st .

86,696 77, 17 77,317

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—

w€ y w yx xw t

5.

Operating Cycle

=

A g. Collection Period + In entory Age . + .

p g

v

p g

4.

Inventory Age:

=

365 ays In entory urno er

365 9.66 37.78 days

RII

B

G

c

q h i f

de d a b

GG

C

B

QP I H

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2.

Collectio

erio :

=

365 D s Acc unt eceiv ble Turn ver 365 8.75 days

98 54

Account Receivable Turnover

=

Net Credit Sale Account Recei a le
86,696.00 9,903.00

8.75

21

@ A@

3 7

0

6

ª ©

´

'  &

3.

Q ic ( cid est) atio: ti : Quick i

=

=

48,264 - 7,750 35, 50 35,850 

   % $ #      " 

¨

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(

ED

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³

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2.

Current atio: Curre t Ratio:

=
=

1.35

¤ ¥ ¡§ ¦ ¡  

£

1.38

£ 

43,334 - 6,877 31, 0 31,460

times

times

s

.

HEWLETT PACKARD CORPORATION
Financial Analysis 2006 2005 2006 2005

Liquidity Ratios
1.

Net Working Capital:
= Current Assets - Current Liabilities = 48,264 - 35,850 = 43,334 - 31,460 12,414.00 11,874.00

=

12,414.00

11,874.00

The Company's net working capital increased over the period. In 2005, the company's net working capital was $ 11,874 M, which now increased 4.55 % and reached up to $ 12,414 in 2006 .

2.

Current Ratio:

=

Current Assets Current Liabilities
48,264.00 35,850.00 43,334.00 31,460.00

=

=

1.35

1.38

In Coca-Cola Company, the Company's Current ratio also continuously decreasing as Net Working Capital decreased. This shows that the Company's ability to meet it current liabilities out of its current assets decreased. In 2004, it was 1.10 which reduced 0.06 in 2005 to 1.04. But in current Financial year 2006, it further reduces with 0.09 form 1.04 to 0.95 rapidly as compared to 2005.

Liquidity 

tios (Con't)
  ¡ ¢ ¢ 

Curr nt

et - Inventory
£ ¤ ¥ ¢

§

¨

© 

3.

Q ic ( cid est)
¦

ti : 

= 

Current Liabilities i ilitie
=

1.13

¢

1.16

Quick (Acid Test) ratio is used to measure the value of organization most current assets to meet/cover its current liabilities. Inventory & Prepaid expenses are not included because they not easily convertible into cash or cash equivalent and are not capable of covering current liabilities. Coca-cola Company's Quick (Acid Test) ratio also on decreasing trend. And this decreased increased with the passage of time. In 2004, it was actually at 0.97 and came down at 0.90 in 2005. In 2006, this down ward trend continue and it further decreased and reached at 0.76 with a decrease of 0.12.

In Short, the Coca-Cola Company's liquidity ratio results show that the company is in a weak position against its current liabilities and this trend is continue. If Company not take pay attention to this situation, it creates serious problem for the company in future.

Activity (Asset Utilization) Ratios Activity ratio are used to determine how quickly various accounts are converted into sales or cash. It is necessary to evaluate the activity or liquidity of specific current accounts. or this purpose, various ratios exist to measure the activity of receivables, inventory & Total Assets.
Net Credit S le Avg. Account Receivable
" # $ $ " % ( ) !0 

1.

cco

t eceivable

r over 
'

= 

& 

' 

&

*Avg. Account R/A=

1 ,

.

"

#REF!
1 2 3 4

=
5

-

ti

!

The Account eceivable Turnover ratio gives the number of times the account receivables are collected during the year. The higher account receivable turnover, the better company in collecting revenue from customers. Moreover, an excessively high ratio show that company follows stringent credit policy.
6

In 2005, ompany s account receivable turnover ratio was 10.38. The drop in this ratio shows a problem in collecting the revenues from the creditors/customers. The company needs to re-evaluate its credit policy.

7

2.

Collection Perio :

=

365 Days
9 @

8

Acc unt #DIV/0!
B

eceivable Turn ver da
C D

=
A

#REF!
B

Collection eriod is t e number of da s it ta es to convert/collect a sale credit sale) into cas .
E F F G H I G P Q I G

9

, Company's collection period was . days (almost as days) t at now increased to . days). ow company's problems increased as t e Company's account receivable time period reduced and econdly, t e company's collection period efficiency decreased. In days (almost
I Q Q Q I R S T B B

Activity (Asset Utilization) Ratios ( on't)
Cost of Good old 3.
W

Inventory Turnover Ratio:

=

V

Average Invent ry Inventory
X Y ` a

* Avg. Inventory

=

7,313.50
X Y `b

U

! ti
ac

=

11.64

!

Inventory turnover ratio describes that how many times the inventory (Finished goods ) are moved/sold. Holding of excess inventory show that Company funds tied up in inventory, high inventory carrying cost and as well as risk of obsolescence. In 2005, Company's Inventory turnover ratio was 5.76 that now reduce slight to 5.33 times. This shows that there is stocking of goods that may be due the introduction of new product line or due obsolete goods that have actually no worth.

4.

Inventory Age:

=

365 Days Inventory Turnover
d f g h

=

31.37

i

!

Inventory age is the ratio of calculating the time period for inventory/finished goods to be hold with the company. In 2005, Company's Inventory age was 63.33 days (almost 63 days) which in 2006 increased to 68.52 days (almost 69 days) with a difference of 6 days that is not good for the company. As much lengthening the holding period show potentially greater the risk of obsolescence.

Activity (Asset Utilization) Ratios ( on't)
5.

Operating Cycle

=

Avg. Collection Period + Inventory Age
q

=

#DIV/0!

p

e

#REF!

The Operating cycle of an organization is the number of days it take to convert inventory and account receivables to cash. For every business entity, the minimum/short operating cycle is desirable. The Coca-cola Company's operating cycle in 2006 is 106.28 days (almost 106 days) that are more then the operating cycle of last year 2005. In 2005, the operating cycle was 98.50 days (almost 99 days) which now length by 7 days. This is an unfavorable trend to tied up amount of money with the non-cash assets or any investment.

6.

Total Asset Turnover Ratio:

=

Sale Avg. Total Assets
79,649.00 #REF!

* Avg. Total Assets=

r

=

-

#REF!

The Operating cycle of an organization is the number of days it take to convert inventory and account receivables to cash. For every business entity, the minimum/short operating cycle is desirable. The Coca-cola Company's operating cycle in 2006 is 106.28 days (almost 106 days) that are more then the operating cycle of last year 2005. In 2005, the operating cycle was 98.50 days (almost 99 days) which now length by 7 days. This is an unfavorable trend to tied up amount of money with the

Leverage (Solvency, Long-Term Debt) Ratios Leverage (Solvency) is the company's ability to meet its long-term obligations as they become due in future. Solvency analysis concentrated on the long-term financial and operating structure of the business. Further more the solvency is dependent long-run profitability, unless the organization is not profitable the organization will not be able to meet its long-term debts.
Total Liabilities Total Assets
0.5347 0.5192
s

1.

De t Ratio:

=

=

The debt ratio compares the total liabilities (total debt) to total assets. It shows the percentage of total funds obtained from the creditors for business operations. The Coca-cola Company's debt ratio show that in 2005 the company make improvement in its debt ratio and reduce it from 0.4913 to 0.4442 . But in 2006, the company slightly improve its debt ratio from 0.4442 of 2005 to 0.4353 in 2006. This shows that the degree of debt decreased to total assets.

7

De t Equity Ratio:

=

Total Liabilities Total Equity
1.15 1.08

t

=

The debt equity ratio is the significant measure of solvency ratio. In high debt result, it will less flexibility for company in obtaining more funds in tight money market. High debt equity ratio also make it difficult fro the company to meet interest charges and principal payments at maturity. The oca-cola ompany s debt equity ratio show that the company¶s debt equity ratio slightly improved as compared to 2005 2004.
u u w v

x

€



Leverage ( olve cy, Lo g- erm ebt) atios
y y ” • – — ˜ – †

‚

3.

er e ti : I terest overage atio:
‡ ‘ ’ ‰  ƒ ‘ ‰

=

Earnin Before Interest & axe (EBI ) Earning efore Intere t axes Intere t Expense
#REF!
™ d –

ˆ

„

…

“

=

#REF!
d

The interest coverage ratio sho s the number o times be ore tax earnings cover interest expense. We can say that it is a sa ety margin indicator that tells ho much decline in earnings an orgad

nization can bear/control. The oca-cola ompany s Interest coverage in 2006 is 30.44 that sho s a positive indicator and sho that more earnings are available or interest charges payments as compared to last year 2005.
e e f ™ d ™

4.

L-T De t to Equity Ratio:

=

Long Term Debt Total Shareholder Equity Total hareholder
0.0653
i j

g

™

=

0.091

The long-term debt to e uity ratio is balance between the firms long term debts and its owner e uity. equity. The Coca-cola Company's long-term debt of equity ratio slightly increase in 2006 at 0.0777 from 0.0706 in 2005. This shows that the company's long-term debts increased over the year while these were decreased in 2005 as compared to 2004 from 0.0726 to 0.0706.
i

Profitability atios Profitability ratios reflects the company positions as per their operations and the return of the organization . What organization's net income or loss after its operations/business activities.
Gross Profit Net Sale
#DIV/0! #DIV/0!

1.

Gross Profit Margin Ratio:

=

=

The gross profit margin reveals the percentage of each dollar left over after the business has paid for its goods. The higher the gross profit earned, the better. Current year 2006, the Coca-Cola Company's gross profit margin slightly increased to 0.6611 from 0.6453 in 2005. This is a positive result for the company that shows company make effort to reduce its merchandising/manufacturing cost.

k

k

n l

o m

2.

Operating Profit Ratio:

=

Earning

efore Interest Net Sale

Taxes (E IT)

=

#REF!

#REF!

The operating profit margin ratio of the company decreased in current financial year 2006. As we note that the company's gross profit ratio increased and its operating profit ratio decreased that show the company has to face some increase in its operating expenses or may be some external factor due to which the company's operating cost not remain in control.

z

Profit ility
y p r v

{

tios ( Con't )
w

y

3.

r fit r i ti : Profit Margin Ratio:
q t u s s q

=
= #DIV/0!

et rofit Net Profit Net Sale
#DIV/0!

Profit margin ratio indicates the profitability generated from revenue. It is an important ratio of the company that summeries the company's profitability and its operations performance. In current year of 2006, the company maintain its profit constant at the rate of last year profits. The profit margin ratio results shows that the earning power of the company remained static.
= Net income Avg. Total Assets
79,649 0.0778 #REF! #REF!

4.

Return on Investment:
* Avg. Total Assets= =

Return on investment (Or Assets) is the main measure of observing the performance of any business. ROI (ROA) shows extent to which earnings are achieved on the investment made in business. ROI indicates efficiency with which management has used its available resources to generate income. The Coca-Cola Company's current year return on investment slightly increased from 0.1604 to 0.1711 in 2006. This shows that the company's assets productivity increased over the period.
Net income Avg. Shareholders
37,660 0.1646 #REF! #REF!

5.

Return on Equity:
* Avg. Shareholders= =

=

Return on Common Equity (ROE) is the measure the rate of retrun earned on the common Stockholder' investment. In 2005, the ROE was 0.3018. There has been slightly increase in the return on equity of the stockholders.

Market Value Ratios Market value ratio are final group of ratios that relates the firm's stock prices to its earning (or book value) per share.
|

Year

Mkt. Price $

O.Stan ing S.hol ers (Million)
|

x

Net Income $ in Million

2004 2005 2006
} ~

41.64 40.31 48.25
ƒ

3500 3507 3511
„

4847 4872 5080
…

. 1.

arning er Earning per Share


=
=

et Income - referred
€  † ‡

ividend
‚

Common Stock Outstandin Common to utstanding
1.45 1.39

Where as some ratio are declining in 2005 & 2006 but the earning per share of share holder continuously increased over the time period specially time the company make sharp increase in earning per share.
  ‘

2.

Price Earning Ratio: rice ar i g atio:
 

=
=

Market rice er S are Mar et Price per Share Earning er S are
‘ ’ ˆ ‰

‹

Œ

Ž

’

n l

33.35

9.

e As we noted that earning per share increased, similarly the price earning ratio also increased. In 2005, the PE Ratio was 29.02 that now raise ot 33.35.
3.

Š

Book Value Per Share

Total Stockholder's equity - Preferred Sto = Share utstandings
0.01 0.01
“

0.01 0.01

Similarly, as the earning per share from . shares book value also increased in
• – – — ˜ ™

”

price earning ratio of the company increases, the company to now . .
˜ ™ š •

—

—

ˆ

h

†

˜

B

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