ANNUAL REPORT HEWLETT-PACKARD VICTORIA KENWARD ACG2021 SECTION 002

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ANNUAL REPORTHEWLETT-PACKARDVICTORIA
KENWARDACG2021 SECTION 002
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Executive Summary

• Hewlett-Packard wrapped up the 2005 fiscal year
  on a very strong note. 2005 produced one of the
  strongest balance sheets in the industry. The
  company has strong assets to build on for the
  coming year. Profits showed an increase from the
  previous year and the companys expectations were
  not only met but exceeded. In summary, HP is
  showing positive growth and has a good investment
  potential.
• http//www.hp.com/hpinfo/investor/financials/annua
  l/2005/05ar-graphics.pdf

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Part A. Introduction

• Mark Hurd, Chief Executive Officer
• Location of home office Palo Alto, California
• Ending date of latest fiscal year October 31,
  2005
• Hewlett-Packards principal products include
  personal computers, printers, monitors and
  projectors, handhelds and calculators, fax,
  copiers, scanners, digital cameras, entertainment
  such as televisions, servers and networking.
• Main geographic area of activity United States,
  Asia Pacific and Europe

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Part A. Audit Report

• Name of the companys independent auditors
  Performance Metrics, Inc.
• In review of Hewlett-Packards 2005 consolidated
  financial statements, the auditing committee has
  declared the statements to be in compliance with
  the accounting principles generally accepted in
  the United States.

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Part A. Stock Market Information

• Most recent price of the companys stock 33.26
• Twelve month trading range of the companys
  stock 19.57 - 34.52
• Dividend per share 0.0800
• Date of the above information March 3, 2006
• I would buy stock in Hewlett-Packard. The trend
  in price of stocks seems to reflect a steady
  increase in the last year. Buying stock in this
  company would be a good investment.

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Part B. Industry Situation and Company Plans

• Hewlett-Packard is part of the fast growing
  technology industry. The company has introduced
  many new products and services in the past year
  as well as made some new acquisitions. On average
  the company produces 11 new patents each day. The
  companys growth for the fiscal year 2005
  increased 6.8 billion. HP has experienced
  significant growth and witnessed an appreciation
  in the price of stock.
• http//knowledgestorm.fastcompany.com/search/index
  /fastco/prov_summary/51191

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Part C. Income Statement

• The format is most like a multi-step
• Hewlett-Packard experienced an increase in gross
  profit from 2004 to 2005 but a decrease in
  operating income and net income.

2005 2004
Gross Profit 86,696 million 79,905 million
Operating Income 3,473 million 4,227 million
Net Income 2,398 million 3,497 million
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Part C. Balance Sheet
Assets Liabilities Stockholders Equity
2005 77,317 million 40,141 million 37,176 million
2004 76,138 million 38,574 million 37,564 million

• The stockholders equity account remained
  relatively stable from 2004 to 2005, the
  liabilities account reflected more of a change in
  the form of an increase.

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Part C. Statement of Cash Flows

• Cash flows from operations are significantly more
  than net income for the past two years.
• The company is growing through investing
  activities.
• What is the companys primary source of financing
  is issuance of common stock under employee stock
  plans.
• Overall, cash has increased over the past two
  years by 1,248 million.

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Part D. Accounting Policies

• Hewlett-Packard recognizes revenue when
  persuasive evidence of a sales arrangement exits,
  delivery occurs or services are rendered, the
  sales price or fee is fixed or determinable and
  collectibility is reasonably assured. HP ceases
  revenue recognition on delinquent accounts based
  upon a number of factors including customer
  credit history, number of days past due and the
  terms of the customer agreement.
• Topics of the notes to the financial statements
  Summary of Significant Accounting Policies, Net
  Earnings per Share, Balance Sheet Details,
  Supplemental Cash Flow Information, Acquisitions,
  Goodwill and Purchased Intangible Assets,
  Restructuring Charges, Financial Instruments,
  Financing Receivables and Operating Leases,
  Guarantees, Borrowings, Taxes on Earnings,
  Stockholders Equity, Comprehensive Income,
  Retirement and Post-Retirement Benefit Plans,
  Commitments, Litigations and Contingencies, and
  Segment Information

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Part E. Financial AnalysisLiquidity Ratios
2005 2004
Working Capital 11,874 million 14,313 million
Current Ratio 1.38 1.50
Receivable Turnover 8.75 times 7.81 times
Average Days Sales Uncollected 41.71 days 46.73 days
Inventory Turnover 7.64 times 6.88 times
Average Days Inventory on Hand 47.77 days 53.05 days
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Part E. Financial AnalysisProfitability Ratios
2005 2004
Profit Margin 4.01 5.29
Asset Turnover 1.12 times 1.05 times
Return on Assets 4.49 5.55
Return on Equity 9.34 11.25
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Part E. Financial AnalysisSolvency Ratio
2005 2004
Debt to Equity 107.98 102.69

• Both the 2005 and 2004 fiscal years the creditors
  have control

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Part E. Financial AnalysisMarket Strength Ratios
2005 2004
Price/Earnings per Share 1.19 1.45
Dividend Yield 1.14 1.13