Fifth Homework

1100 Words Nov 4th, 2015 5 Pages
Fifth Homework

Use Hewlett Packard’s financial statements to answer these questions. They are in a separate file.

1. Predict revenues in 2015. Revenues fell in 2014 because services sales fell due to key account runoff in ES (Enterprise Services). Assume that revenues grow by 5% in 2015. 111,454,000,000*(1+5%)=117,026,700,000

2. Do products or services have a larger growth rate of revenues in 2014? Products revenue growth rate:(73,726,000,000-72,398,000,000)/72,398,000,000=0.018 Services revenue growth rate:(37,327,000,000-39,453,000,000)/39,453,000,000= -0.054

3. Do products or services have a larger gross profit margin in 2014? Show your calculations.
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What level of accounts receivable would you anticipate for 2015? Calculate the accounts receivable turnover ratio using the average level of accounts receivable. When you project accounts receivable assume that it equals revenues divided by the projected accounts receivable turnover ratio. Projected Accounts receivable equals to projected revenue divided by projected accounts receivable turnover ratio. The projected turnover ratio stays the same as 2014 and the projected revenue increases in 2015, so the accounts receivable will increase in 2015.

2014 Accounts receivable turnover ratio: Revenue/Average accounts receivable=111,454,000,000/(13,832,000,000+15,876,000,000)/2=7.503 2015 Accounts receivable=Projected revenue/Projected Accounts receivable turnover ratio=117,026,700,000/7.503=15,597,321,000

6. Calculate Hewlett Packard’s fixed asset turnover ratio for 2014. If the same ratio occurs in 2015 does that imply that PPE will increase or decrease in 2015? 2014 Fixed Assets turnover ratio=Revenues/Average Net PPE=111,454,000,000/(11,340,000,000+11,463,000,000)/2=9.775

It implies that Net PPE will increase in 2015. Projected Net PPE equals to projected revenue divided by projected fixed assets turnover ratio. Since the fixed assets turnover ratio has not change and the projected revenue increases, the net PPE will also increase.

7. Footnote 7 lists Hewlett Packard’s depreciation

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