Comprehensive Problem: Sun Microsystems

1300 words 6 pages

Comprehensive Problem: Sun Microsystems
A complete analysis conducted on the financial statements and status of Sun Microsystems exposed key issues determined to be of great import to shareholders. After examining the research findings and analysis, it seems that Sun Microsystems finances have not maintained a steady incline. In fact, it had definitely experienced some highs and lows in its return on investment and stockholders’ equity over a four- year evaluation spanning the years 1998 through 2001. In an effort to decipher the problems within the company’s operations, data from the following reports and ratios offered considerable clues. To collect relevant data, the annual
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Table 5
Price to book value = Stock price/book value
1998 1999 2000 2001
P/BV 9.53 10.81 12.45 2.91

Once again, the sharp fall off in price to book value between 2000 and 2001 can be attributed to the decline in performance (and the impact on the stock prices). Book value was going up, but the ratio declined sharply due to the declining stock prices. The price/book ratio shows that the stock at Sun Microsystems was not as highly valued in the market in 2001. The difference between the net worth per share of the company and what the company is able to sell shares for greatly decreased. Changes in the industry as a whole or changes in consumer habits could be contributing factors to the change in stock values experienced at Sun Microsystems. Internally, Sun Microsystems needs to explore ways to maximize profit and minimize costs of producing goods.
Business Alternatives
Looking at the financial statement analysis for Sun Microsystems, one can definitely see the company’s strengths and their needs. The balance sheet indicates what the firm owns and how these assets are financed in the form of liabilities or ownership interest and the statement of income is the major device for measuring the profitability of a firm over time (Block and Hirt, 2005, p.25, 28). The financial statements analysis shows that Sun Microsystems has done very well and made it through the challenge from 2000 to 2001.


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